DECIDED JUNE 8, 1960.
Declaratory judgment. Laurens Superior Court. Before Judge Stephens. January 12, 1960.
Martin, Snow, Grant Napier, for plaintiff in error.
H. Dale Thompson, R. M. Daley, contra.
1. Action against the surety on the tax collector's bond for defaults relating to 1953 taxes is barred by the applicable statute of limitations.
2. The court erred in declaring that interest on the principal sum should run from the date of execution issued by the county.
3. The surety was liable under its 1957-60 bond for illegally withheld commissions for the year 1956.
4. The judgment of the superior court is reversed to the extent indicated in the opinion and is affirmed in all other respects.
DECIDED JUNE 8, 1960.
Employers Liability Assurance Corporation, Ltd., filed a declaratory judgment action in Laurens Superior Court against S. A. Lewis, R. A. Register and J. W. Robertson, Commissioners of Roads and Revenues of Laurens County, seeking a determination of certain questions regarding its liability as surety on bonds of T. C. Keen, Tax Commissioner of Laurens County. The liability of Keen for certain commissions wrongfully withheld by him has been previously determined by the Supreme Court. See Laurens County v. Keen, 214 Ga. 32 ( 102 S.E.2d 697), Keen v. Lewis, 215 Ga. 166 ( 109 S.E.2d 764). The case was submitted to the judge without a jury under an agreed statement of facts which stipulated that T. C. Keen is the duly elected Tax Commissioner of Laurens County, and at the present time is serving a term of office for four years for the period commencing January 1, 1957. Keen likewise served in the same official capacity during the term of four years commencing January 1, 1953. At the commencement of each of these terms of office the plaintiff signed as surety Keen's official bond in the amount of $15,000, separate bonds being executed for each term of office. Said bonds are in conformity with the Georgia law relating to official bonds for tax collectors or tax commissioners. Final report for the year 1953 was filed by Keen with the defendants on June 11, 1954. No extension of time was obtained by Keen from the Comptroller General or from the defendants.
On May 17, 1957, defendants sent to Keen and to the plaintiff the following notice: "You are hereby notified that the Board of County Commissioners of Laurens County, Georgia, will meet on the 21st day of May, 1957, for the purpose of considering what monies due to Laurens County are being wrongfully withheld by T. C. Keen, Sr., as Tax Collector. Either of you may appear at 10 a. m. before us for the purpose of being heard in connection with this matter." The minutes of the meeting held pursuant to this notice are as follows: "Dublin, Georgia, May 21, 1957. After much discussion in regard to certain commissions Mr. T. C. Keen, Sr., Tax Commissioner was drawing, Mr. Register moved `that the Clerk be instructed to issue an execution against T. C. Keen, Sr., Tax Collector and his bonding company for the sum of $23,405.78 plus interest at 7% on the amounts as paid in on June 11, 1954, June 6, 1955, and January 15, 1957, as money that the said T. C. Keen, Sr., was holding due to Laurens County; it appearing that Mr. Keen had been notified of the meeting by registered mail and had stated that it was not convenient for him to appear and that Mr. C. F. Vickers from his bonding company was present as an observer, said company having been notified. Be it further resolved that after the clerk for the commissioners shall issue the execution that same be recorded by the clerk of the superior court'. Mr. Robertson seconded the motion. The motion was made unanimous."
On May 21, 1957, the defendants issued an execution against T. C. Keen, Sr., as tax commissioner and the plaintiff as surety on his official bond for the sum of $23,405.78, and the further sum of $2,864.13 for interest up to the 21st day of May, 1957, and provided that said execution should bear interest on the principal sum from May 31, 1957, at the rate of 7% per annum. Subsequently, in conformity with the decision of the Supreme Court of Georgia, the principal amount was reduced to $19,617.44, and all interest charged prior to May 21, 1957, was written off. Included in said execution was $7,621.08 for commissions which the defendants contended that Keen had illegally withheld from 1953 taxes collected prior to April 20, 1954, but actual notice was not given to the defendants that said sums were withheld until the 1953 final report was filed on June 11, 1954. Said execution was issued pursuant to and in conformity with Code § 89-824. No formal demand was made upon the plaintiff as surety until some time thereafter when formal demand for payment was made by a letter written by the county attorney to the plaintiff and received by it on September 4, 1959.
On September 1, 1959, the defendants issued an execution against T. C. Keen as tax commissioner and the plaintiff as surety in the amount of $3,523.44 for commissions illegally withheld by Keen for the year 1956. On September 29, the defendants caused the county attorney to write to Hon. George B. Hamilton, State Treasurer in Atlanta, and in said letter advised said State Treasurer that unless the sum of $21,013.64 was paid by plaintiff within ten days, they would file an application for a receiver to take charge of securities of that value which are now held by the State of Georgia under the laws relating to surety companies operating in said State.
It was further stipulated that by reason of the foregoing facts an actual controversy existed. On January 12, 1960, the court rendered a judgment in pertinent portion as follows: "It is hereupon ordered and declared: (1) That the liability of plaintiff, as surety upon the bond of T. C. Keen, Tax Commissioner, for faithful performance of his duties for the term of office, 1953-1954-1955 and 1956 is the principal sum of $15,000. (2) That interest on said sum shall run from the date of execution issued by Laurens County on May 21, 1957, at the rate of 7% per annum to the date of payment. (3) It appearing that plaintiff has paid into court the sum of $15,000 principal, and $89 interest, from September 4, 1959; it is ordered that said sum be credited upon the liability herein established. (4) It appearing that plaintiff was surety upon the bond of T. C. Keen, Tax Commissioner, of Laurens County, Georgia, for the term of office beginning January 1, 1957, and that during said term Laurens County, on the 1st day of September, 1959, issued an execution against T. C. Keen, as principal and plaintiff, as surety, in the amount of $3,523.44, for commissions illegally withheld. It is ordered that such bond for such term of office is liable for such execution together with interest thereon from the date of said execution, to wit: September 1, 1959, at 7% per annum to date of payment." Upon this judgment error is assigned by the plaintiff on the following grounds: "(1) Plaintiff was not liable for commissions illegally withheld for the year 1953, in the amount of $7,621.08, because the same was barred by the statute of limitations. (2) Interest should have been charged from September 4, 1959, which was the date of the demand upon the surety. (3) The commissions illegally withheld for the year 1956 in the amount of $3,523.44 should be charged against the tax commissioner's bond for the period 1953-1956 instead of against the bond for the period 1957-1960."
1. It is first contended that the trial court erred in holding the plaintiff surety company liable for commissions illegally withheld by the tax commissioner for the year 1953. The plaintiff urges that this claim against it is barred by the statute of limitations applicable in this instance. "Code § 89-832 fixes the statute of limitations at 6 years from the date a cause of action arises, as against the tax collector or tax commissioner, and 3 years from the date a cause of action accrues, as against the surety on his official bond. United States Fidelity c. Co. v. Toombs County, 187 Ga. 544 ( 1 S.E.2d 411)." Laurens County v. Keen, 214 Ga. 32, 38, supra.
The petition alleges and the answer admits that the plaintiff had signed as surety certain official bonds of T. C. Keen as tax commissioner and that "said bonds are in conformity with the Georgia Law relating to official bonds for tax collectors or tax commissioners." Code § 89-806 sets forth certain bonding requirements applicable to the office of tax commissioner: "The State authorities shall require of all collecting officers and all officers to hold public money, so far as relates to moneys or revenues of the State, to give, on or before entering on the duties of their office, appointment, or employment, bond with good security for the faithful performance of the duties of their office and faithfully to account for all moneys coming into their hands, together with such other conditions as the laws may require as to the official bond of the particular officer in question. . ."
The duties of the tax commissioner with regard to accounting for taxes are set forth in Code § 89-827: "Annually on or before April 20, unless the time shall be extended by the Comptroller General for cause which said Comptroller General shall deem to be sufficient, each tax collector shall make and file an accounting with the Comptroller General as to State taxes, and with the county authority of his county as to county taxes, for the preceding year, in which the accounts of said tax collector shall be fully stated, and uncollected items on the digest of such preceding year shall be listed in detail. . . If the Comptroller General or the county authority, as the case may be, shall find that all collections made to the date of the accounting have been properly accounted for by the tax collector, an order to that effect shall be entered by the Comptroller General or the county authority, as the case may be; but if it appear that there is any default in accounting for collections made, the tax collector and his sureties shall be promptly cited, as in this law provided for, to make good such default." For sufficient cause, the Comptroller General may allow an extension of time for such accounting not exceeding 4 months. Code §§ 89-827, 89-828.
The plaintiff's contention is that as to its liability as surety for the 1953 taxes, the three-year statute of limitations began to run on April 20, 1954, the date fixed by statute for accounting, and action against it was therefore barred by the time the execution was issued on May 21, 1957. On the other hand the defendants argue that there was no illegal withholding of any commissions until the time of actual filing of the tax commissioner's report on June 11, 1954, and the statute would begin to run from that date. In United States Fidelity c. Co. v. Toombs County, 187 Ga. 544 (7), supra, the Supreme Court, in considering the liability of a collecting officer for moneys with which he is charged and which are due the county, rejected the contention that the statute of limitations does not begin to run against the county until the actual default by the officer becomes known, and held: "Ordinarily a right of action has its inception from the time there has been a breach of duty. When, however, the basis of the action is actual fraud involving moral turpitude, the statute of limitation is tolled, and does not begin to run until such fraud is discovered, or could have been discovered by the exercise of ordinary and reasonable diligence." In Keen v. Lewis, 215 Ga. 166, 171, supra, the Supreme Court, considering the same transaction now before us, held that under the pleadings and evidence there involved, there was no question but that the amount of commissions for 1953 was claimed by the tax commissioner in good faith. In the present case there is no contention that the basis of the action is actual fraud and consequently the general rule applies. The cause of action therefore had its inception and the statute of limitations began to run from the time there was a breach of duty on the part of the tax commissioner.
The Supreme Court in Century Indemnity Co. v. Fidelity c. Co., 175 Ga. 834 ( 166 S.E. 235) held that no defalcation by a county treasurer occurred until it became his official duty to pay over the funds held by him as treasurer. Applying this principle to the facts of the present case, the tax commissioner had not filed a report or made an accounting for 1953 taxes on or before April 20, 1954, as required by Code § 89-827. It is apparent that these failures constituted a breach of his official duty for which he and the surety on his official bond would both be liable. Accordingly, a cause of action in this matter accrued on April 20, 1954, and the execution issued on May 21, 1957, was barred by the statute of limitations to the extent that it sought to enforce liability against the surety for amounts withheld for 1953. We are not concerned here with the effect of an extension of time by the Comptroller General, as no such extension was sought or granted in this case. The superior court erred in declaring the plaintiff surety liable on the bond of the tax commissioner for the year 1953.
2. The next question for decision is whether interest on the principal amount was properly charged from the date of issuance of execution, May 21, 1957. Code § 89-833 provides: "Upon breaches of the bond of any officer, bank, or depository, interest shall run against the principal on the bond at the rate of seven per cent. per annum from the date of the breach, and against the surety at the same rate from the date of the demand on the surety. . . Provisions of existing law imposing higher rates of interest or penalties upon principals or sureties upon any of such bonds are superseded by the provisions of this section." The provisions of this section as to interest supersede those of Code § 92-5504 providing for interest at the rate of 20 percent per annum on the principal amount against the tax collector and his sureties.
The defendants contend that the issuance of the execution against the principal and the surety and its recording on the execution docket constituted a demand within the meaning of this law. In Massachusetts Bonding Ins. Co. v. Board of Commissioners c., 172 Ga. 409 (2) ( 157 S.E. 459) the Supreme Court held: "Where a defalcation occurs in the office of a county treasurer, the statutory interest of 20 percent per annum, specified in the Civil Code, § 1187 [Code § 92-5504], to be charged against the treasurer and the surety on his bond, should be calculated from the date of demand for payment or the equivalent of demand such as the issuance of execution and the like, and not from the date of defalcation where no such demand is made at that time." While this language indicates that issuance of execution may amount to a sufficient demand, a closer reading of the opinion discloses that the surety had tendered to the county the full amount of principal together with interest thereon from the date of the execution and the only point actually adjudicated in this case was that the statutory interest did not run from the date of defalcation.
A more analogous situation is found in Frink v. Southern Exp. Co., 82 Ga. 33 (5) ( 8 S.E. 862, 3 L.R.A. 482): "When no demand has been made, the plaintiff is entitled to interest only from the time the writ was served on the defendants. Interest having been calculated by the jury from the time the money was lost to the date of the verdict, it is directed that the interest found up to the service of the writ be written off, and that interest be calculated from the time of the service to the judgment." It is highly significant that the Supreme Court in this case did not allow interest to run against the surety from the date suit was filed, but expressly limited the commencement of such interest to the date of service of process on the defendant. This decision is in accord with the general rule as stated in Stearns' Law of Suretyship (5th Ed.) p. 283, § 8.19: "Where demand is necessary, a surety upon a bond is liable for interest upon the damages ascertained from the date of the demand. If no demand is made, interest may be recovered from the date of service upon the surety in the action upon the bond."
Code § 89-833 requires a demand on the surety to initiate the running of interest against it but does not prescribe a specific form of demand. In the absence of specific statutory or contractual requirement it is only necessary to constitute a demand that the surety be notified that immediate payment of the debt is requested. See 47 C. J. S. 58, "Interest", § 46b. There is no requirement here of demand on the principal to initiate the running of interest against him, and the evident purpose of the statutory requirement of demand on the surety is to give such surety an opportunity to immediately reimburse the county for any loss within the terms of the bond occasioned by the breach of the principal, without subjecting it to the payment of interest prior to the time the county notifies it that immediate payment of such obligation is requested.
In the present case, there was no such notification of the surety constituting an actual demand for payment by the county, and we do not think that simply issuing the execution and recording it on the execution docket was sufficient to constitute the demand on the surety which the statute requires. This conclusion is not altered by the fact that a representative from the bonding company was present as an observer at the meeting of the county commissioners on May 21, 1957, when it was voted to issue execution "against T. C. Keen, Sr., tax collector and his bonding company." In the absence of an actual demand, there is nothing in any of these proceedings on the part of the commissioners which is remotely equivalent to the service of process in a pending action against the surety so as to bring this case within the principle of Frink v. Southern Exp. Co., 82 Ga. 33, supra. The court therefore erred in declaring that interest on the principal sum should run from the date of execution issued by Laurens County on May 21, 1957.
3. The other question involved in this case is whether or not illegally withheld commissions for the year 1956 are covered by the bond for the term 1953-56, or by the bond for the term 1957-60. T. C. Keen was re-elected tax commissioner in 1956 and began his new term of office on January 1, 1957.
In Century Indemnity Co. v. Fidelity c. Co., 175 Ga. 834, supra, the Supreme Court considered the question of liability between two sureties on the bonds of a county treasurer who had succeeded himself in office and held that the liability is against the company which was surety during the term within which default occurred. Since, as we observed in division 1 of this opinion, the default occurs when the officer fails to produce and pay over the funds as required by law and since Code § 89-827 requires a tax collector annually on or before April 20th to make and file an accounting with the county authority as to county taxes for the preceding year, the withholding of taxes for 1956 was not complete until the provisions of this section were violated by failing to account in 1957. Accordingly, the court did not err in holding plaintiff liable under its 1957-60 bond for illegally withheld commissions for the year 1956.
The judgment of the superior court is reversed to the extent that it declares the plaintiff liable as surety on the bond of T. C. Keen for the year 1953, and to the further extent that it provides for the running of interest against the plaintiff prior to September 4, 1957, on any execution issued against it in this matter by Laurens County. The said judgment is affirmed in all other respects.
Judgment affirmed in part and reversed in part. Nichols and Bell, JJ., concur.