Town of Troy v. American Fidelity Co.
| Decision Date | 06 May 1958 |
| Docket Number | No. 964,964 |
| Citation | 120 Vt. 410,143 A.2d 469 |
| Court | Vermont Supreme Court |
| Parties | TOWN OF TROY v. AMERICAN FIDELITY COMPANY. |
C. O. Granai, Barre, Raymond L. Miles, Newport, for plaintiff.
Witters, Longmoore & Akley, St. Johnsbury, for defendant.
Before CLEARY, C. J., HULBURD, HOLDEN and SHANGRAW, JJ., and SYLVESTER, Superior Judge.
This is an action of contract against the surety on a bond. The defendant pleaded a general denial and the statute of limitations. The trial was by the court, findings were filed, and judgment entered for the plaintiff to recover $13,548.53 damages and costs.
The case is here on defendant's exceptions to (1) findings of fact, (2) supplemental findings, (3) failure of the court to find as requested, and (4) to the judgment order. This appeal poses three principal questions of law: (a) the legal effect of the original bond and the continuation certificates as limiting, if any, the amount of recovery; (b) the application of the statute of limitations to the facts of the case; and (c) the right, if any, of the Town of Troy to recover for that portion of the defalcations from funds belonging to the Town School District.
The judgment of the lower court covered defalcations of M. C. Phillips as treasurer of the Town of Troy for the years 1942 to 1948, inclusive. The writ is dated July 1, 1955 and was served July 14, 1955.
Max Carroll Phillips, herein referred to as M. C. Phillips, was duly elected Town Clerk and Treasurer of the Town of Troy, Vermont, previous to, and during the years 1942 to 1948, both inclusive. On March 11, 1937, Mr. Phillips as principal, and the American Fidelity Company, as surety, entered into a certain bond No. 79792, in favor of said town which, except as to signatures, is in words and figures following:
'Town Officer's Bond
'Know All Men By These Presents: that we, Max Carroll Phillips of North Troy in the County of Orleans and State of Vermont, as principal, and the
of Montpelier, in the County of Washington and State of Vermont as surety, are held and firmly bound unto the Town of Troy, Vermont, in the County of Orleans and State of Vermont, in the penal sum of Four thousand dollars, to be paid unto the said municipality for which payment well and truly to be made, the said principal binds himself, his heirs, executors and administrators, and the said surety binds itself and its successors firmly by these presents.
'Signed and sealed this 11 day of March, A.D. 1937.
'The Conditions Of This Bond Are Such
'That if said Max Carroll Phillips shall well and faithfully execute the office of Clerk and Treasurer for said municipality for the term for which he was duly elected on the 2nd day of March, 1937, and shall at all times faithfully account for all the moneys and other things which come into his hands and possession by virtue of his said office, and shall well and faithfully perform all and singular, the duties thereof, as prescribed by law, so as to save and keep harmless and indemnified the said municipality and all the inhabitants thereof from all actions, suits, damages, losses, costs and trouble by reason of anything omitted to be done in said office, then this bond shall be null and void; otherwise to be in full force and effect.
'This Bond is subject to the following conditions:
.
In March of each year, from 1938 to 1948 inclusive, the defendant caused to be executed and delivered to the plaintiff a continuation certificate in the following form, except as to dates and signatures of the officials of the American Fidelity Company which are omitted, viz.:
'Continuation Certificate
'American Fidelity Company
'Montpelier, Vermont
'In consideration of the renewal premium the American Fidelity Company hereby continues its bond described herein subject to all the conditions and terms thereof for the term for which the officer hereinafter named was elected on the 3rd day of March 1942
'This continuation is executed upon the express condition that the company's liability under said bond and this and all continuations thereof shall not be cumulative and shall in no event exceed the sum of Four thousand Dollars.'
An audit was made, by certified public accounts, of the books and records of the Treasurer, School Directors, and Treasurer of the Town Library, Town of Troy, as evidenced by the Annual Town Reports, for the years 1942 to 1948 inclusive. The books and accounts of Mr. Phillips, as Treasurer, including the grand list books, were audited each year in question by the town auditors according to the provisions of Public Laws, § 3515, and Vermont Statutes, Revision of 1947, § 3593. No shortage on the part of Mr. Phillips was discovered.
Following is a yearly breakdown of defalcations of Mr. Phillips during the period in question, indicating total shortage and respective shares of the Town, and School District, in accordance with the voted tax rates, as revealed by an audit by Mr. King of the State Auditor's office in May or June of 1954.
Year ending Total Town School District
Dec. 31, 1942 $1,347.84 $ 876.10 $ 471.74
Dec. 31, 1943 1,516.32 1,010.88 505.44
Dec. 31, 1944 1,680.00 1,142.40 537.60
Dec. 31, 1945 1,680.00 1,142.40 537.60
Dec. 31, 1946 1,898.40 1,142.40 756.00
Dec. 31, 1947 2,116.80 1,310.40 806.40
Dec. 31, 1948 2,116.80 1,310.40 806.40
---------- --------- ---------------
During said periods Mr. Phillips was ex officio Treasurer of the Town School District of the Town of Troy, by virtue of § 2 of the Acts of 1935, V.S. 47 § 4418. Mr. Phillips was in charge of the entries made in the grand list books during the whole period with which this case is concerned.
The technique of concealment used by Mr. Phillips in the various years from 1942 to 1947 inclusive, varied, but each year the grand list totals exactly balanced with the receipts accounted for, leaving the inference clear that the discrepancies in totaling were deliberate attempts to fraudulently conceal tax receipts, represented by the defalcations unaccounted for. The shortage each year represents taxes of the Portland Pipe Line Company and the Portland Pipe Line Corporation.
The Portland Pipe Line Company owned property in the Town of Troy, appraised as real estate for years 1942 to 1945 inclusive. Beginning with the year 1946 this property was carried on the books as owned by the Portland Pipe Line Corporation. In 1948 it was entered on the Grand List book but apparently erased, Pl. Exh. 9. The assessed valuation for the years 1942 and 1943 was $35,100 with a grand list of $351. In later years it was valued at $35,000 with a grand list of $350 for each year.
The Portland Pipe Line Company and the Portland Pipe Line Corporation paid its yearly tax by check. These checks are for the total taxes assessed against said companies, less discount each year, and are exactly in amount the yearly shortages as shown in the breakdown of defalcations as above set forth in this opinion, excepting however, the tax paid for the year 1947 was $1,881.60 instead of $2,116.80. The grand list for that year was $350 and the tax rate $6.30. The difference of $235.20 is reflected in Mr. King's audit as a defalcation for the year 1947. Check for the year 1942 was made payable to the order of 'Town of Troy, M. C. Phillips, Treasurer, Troy Vermont'. The checks for the remaining years were made payable to 'Town of Troy, Vermont, M. C. Phillips, Treasurer, Troy, Vermont.'
The grand list of the Portland Pipe Line Company and the Portland Pipe Line Corporation was not included in the grand list total of the town, for the years in question, and thereby not reflected in the total property taxes for which Mr. Phillips was to account.
The grand list book for the year 1948 shows no listing of the Portland Pipeline Corporation on the line where the name of this corporation would alphabetically appear, an obvious erasure, even though it owned property in that year valued at $35,000 with a net tax of $2,116.80 which was paid. While the pattern of mistotaling or omission of entries varied to some extent, the net result for each year was the same.
The Selectmen of the Town of Troy first learned of the shortages for the years 1942 through 1948 at the time of the audit by Mr. King, on or about May 15, 1954. On June 18, 1954 written notice was given to the defendant of said shortages. No demand was made upon the defendant prior to the bringing of this action...
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