Opinion
14671
April 25, 1938.
Before OXNER, J., Cherokee, September, 1937. Judgment affirmed.
Action by the State of South Carolina, upon the relation of Cherokee County, S.C. and another against H.M. Brown and another to recover penalties on taxes of the Hamrick chain of mills and costs of an audit of the treasurer's office of Cherokee County. Judgment for plaintiffs, and defendants appeal.
The order of Judge Oxner follows:
This is an action against H.M. Brown, former treasurer of Cherokee County, and American Surety Company of New York, surety on the official bond of the said H.M. Brown. The action involves various items which the plaintiffs contend should be allowed. Subsequent to the commencement of the action the parties amicably adjusted between themselves all items in dispute except two. The plaintiffs seek to recover against the defendants approximately $3,000.00 in penalties on taxes of the Hamrick chain of mills. The remaining item in dispute is the claim on the part of the plaintiffs for approximately $1,000.00 representing costs of an audit of the treasurer's office which was made soon after the defalcation was discovered. These two items which are in dispute will be discussed in the order above set out.
It appears that on March 30, 1934, checks were given by the Hamrick chain of mills for the 1933 taxes, including a 2 per cent. penalty. Tax receipts were issued upon receipt of checks and taxes marked paid on books. There were about eight of these checks by the various mills in the chain. The treasurer did not immediately deposit any of these checks, but, on the contrary, held these checks for various periods of time before depositing them. The checks were deposited at various times between July, 1934, and December, 1934. The testimony shows that during all of this time the mills had on deposit ample funds to have taken care of these checks, and there is no testimony of any request or effort on the part of the mills to have the treasurer withhold depositing the checks. When the checks were deposited, on some of them the dates were changed from March 30, 1934, to a later date. Apparently, these changes in dates were made by the treasurer, or under his supervision.
The bond in question is conditioned, in substance, that, during the period which he may continue in office, the said Brown shall well and truly perform the duties of said office. It must be remembered in the consideration of this case that his bond is not conditioned upon turning over all money placed in his hands, but is conditioned upon faithful performance of his duties.
Under Section 2795, Code 1932, a treasurer is not authorized to receive checks in payment of taxes. Independent of statute, this is also true at common law. When a taxpayer uses a check in the payment of taxes he constitutes the treasurer his agent in the handling of said check. The law does not regard the taxes as paid until the checks are paid. It is urged by counsel for the defendants that checks are usually used in South Carolina as a medium of paying taxes. The fact that taxes are usually paid in this manner does not give such procedure the sanction of law. The statute above referred to is mandatory. Therefore, the situation is the same as if the mills in question paid the taxes when the checks were actually deposited. At that time the subsequent penalties for the year 1934 had accrued.
It is clear to me that Section 2836 of the Code of 1932 is conclusive of the liability of the defendants. This section, in substance, provides that after the treasurer has receipted the auditor for his duplicate he shall be charged with the taxes, assessments, and penalties charged thereon, except such as may be put on the delinquent list. The statute is clear that he is personally liable for all such taxes, penalties, and assessments on the duplicates, except such as are placed on the delinquent list. The section specifies what causes may be assigned by the treasurer for placing taxes on the delinquent list. Neither of the causes therein set out is applicable to the taxes and penalties in question. The liability of the surety is coextensive with that of the treasurer. When the treasurer collected the taxes in question, the remaining penalties for the year 1934 had accrued. The situation is the same as if, upon the accrual of all taxes for the year 1934, the treasurer had accepted the taxes and only a portion of the penalties in settlement. So that after May 1, 1934, the treasurer stood charged as a matter of law with the total amount of all taxes for 1933 against the four mills, and all penalties which had accrued under the provisions of the joint resolution of March 31, 1934, which reads as follows: "The time for the payment of property taxes assessed for the year 1933 is hereby extended to May 1, 1934, at which time all such taxes remaining unpaid, together with all penalties accrued thereon, as now provided by law, shall go into execution."
The following section, Section 2837, gives the treasurer a remedy when charged with taxes not in fact paid. It is strenuously urged by the surety that if there is any liability for these penalties on the part of the mill, execution can now be issued for such penalties and same collected, and consequently there has been no damage to the plaintiffs. At first, this contention gave me some concern. I am now convinced, however, that it is clearly untenable. As above stated, Section 2836 is mandatory. If the treasurer is liable, it follows that the surety is liable. It may be, although I do not undertake to so decide, that the county and State could now issue executions for these penalties. Assuming, however, that such is the case, under the foregoing sections, the State and county are not compelled to do so as a condition precedent to holding the treasurer and his surety liable. If the treasurer stands charged with taxes which should be paid by the taxpayer, he is amply protected by Section 2837. If the treasurer could escape liability by first requiring the county to issue execution, there would have been no necessity for Section 2837.
As above stated, this bond is conditioned upon the treasurer faithfully performing the duties of his office, and not upon turning over all moneys received by him.
None of the attorneys have cited any cases in point and I have been able to find only one case bearing on the particular issue here involved. In the case of Ward v. Marion County, 26 Tex. Civ. App. 361, 62 S.W. 557, 558, 63 S.W., 155, the tax collector issued receipts to his creditors for taxes which he did not collect. It was there held that the sureties on his bond were liable therefor. The sureties contended in that case that the collector was not authorized to receive anything but money in the payment of taxes; that no money came into the collector's hands by reason of the receipts issued; and the right of the county to recover such taxes had always existed and still existed. The Court of Civil Appeals of Texas at first sustained that contention, but on a petition for a rehearing, reconsidered the matter, and held the sureties liable. The Court said: "We have reconsidered the case as to the liability of the sureties for the sums for which the collector issued receipts without receiving money therefor, and believe that there was error in holding, as we did in the original opinion, that the sureties were not liable. If the condition of the bond had been simply that the collector should account for all moneys collected, we would be disposed to adhere to the ruling. The condition of such bonds, however, is generally for the faithful performance of the duties of the office."
It is further urged by counsel for defendants that the penalties were never placed on the books by the auditor. But neither the treasurer nor his surety will be heard to complain about the penalties not being placed on the books, when such was brought about by the improper conduct on the part of the treasurer.
It is also probably true that the treasurer and his surety would be estopped to assert that the taxes were not paid on March 30, 1934, but this estoppel would not apply to the State and county.
Upon the question as to whether or not, in view of the conduct of the treasurer, he or his surety can now proceed under Section 2837, I express no opinion. That issue is not before me.
The remaining question is an item of approximately $1,000.00, representing an audit made. I seriously doubt whether such an item is chargeable against the bond. Without passing upon this, however, if there be any liability on the part of the bonding company for such audit, the liability could not extend beyond the additional audit required by reason of the defalcation of the treasurer. I do not think the testimony is sufficient to show an express contract on the part of the surety to pay for this audit, and the evidence is too uncertain and indefinite to determine what portion of the amount sued for is attributable to the additional audit necessary by reason of the defalcation. It is practically conceded by the plaintiffs in their written argument that the defendants could not be held for the whole amount of this audit, and, as above stated, the testimony fails to disclose what portion of this audit in amount was made necessary by the shortage of the treasurer. For this reason this item is disallowed.
The penalties in question amount to the sum of $2,404.50.
It is ordered that the plaintiffs have judgment against the defendants for the sum of $2,404.50, and the costs of this action.
Messrs. Wolfe Fort and Carlisle, Brown Carlisle, for appellants, cite: As to legal assessment of taxes: 194 S.E., 66; 54 S.C. 564; 32 S.E., 691; 25 A. E., 199, 323; 49 S.C. 188; 27 S.E., 1; 136 S.C. 439; 134 S.E., 387; 56 F.2d 1059. Liability of treasurer for failure to add penalty to delinquent taxes: 89 S.C. 224; 71 S.E., 826; 15 S.C. 1; 40 Am. Rep., 675; 149 S.C. 402; 147 S.E., 444. Payment: 54 Am. Rep., 278; 44 A.L.R., 1231; 48 C. J., 617; 38 Am. Rep., 544; 167 S.E., 387; 141 S.E., 543; 194 S.E., 121; 79 N.W., 979; 166 S.C. 481; 165 S.E., 197. Collection of penalties: 16 S.C. 32; 16 L.R.A. (N.S.), 269; Ann. Cas., 1912-B, 788; 2 Hill, 457; 101 U.S. 773; 37 Cyc., 1543. Joinder: 132 S.C. 78; 129 S.E., 131; 142 S.C. 7; 140 S.E., 253; 173 S.C. 77; 174 S.E., 902; 25 R.C.L., 1331; 135 S.C. 107; 133 S.E., 210; 136 S.C. 15; 134 S.E., 209.
Messrs. John M. Daniel, Attorney General, J. Ivey Humphrey and M.J. Hough, Assistant Attorneys General and Hall, Vassy Hall, for respondents, cite: Authority of treasurer to accept check of taxpayer: 166 S.C. 481. Liability of treasurer: 92 S.C. 329; 89 S.C. 224. As to reasonable time for presentation of checks for payment: 181 S.C. 496; 98 S.C. 294; 156 S.C. 397. Liability of surety: 92 S.C. 329; 104 S.C. 167; 57 S.C. 459; 149; S.C. 402; 70 S.C. 1; 164 S.C. 75; 168 S.C. 294.
April 25, 1938. The opinion of the Court was delivered by
The issue before us is whether the lower Court erred in adjudging the defendants, H.M. Brown and American Surety Company of New York, liable for the sum of $2,404.50 on account of penalties which the defendant, Brown, then treasurer of Cherokee County, failed to collect from the four textile mills, Alma Mills, Hamrick Mills, Musgrove Mills, and Limestone Mills, known as the Hamrick group of mills.
His Honor, Judge Oxner, by whom the cause was heard, held that under the evidence and the applicable principles of law, both the treasurer and the defendant, American Surety Company of New York, are liable, and accordingly gave judgment against them in favor of the plaintiffs. The same questions are presented to us by this appeal which were considered in the lower Court, and one additional issue which was not before Judge Oxner.
We have carefully considered the able brief of the appellants, but are convinced that Judge Oxner has correctly decided the questions involved in his able and well-considered order, which we adopt as the judgment of the Court, and which will be reported.
The defendants likewise appeal from an interlocutory order passed by his Honor, Judge Sease, in which he overruled a motion of the surety company to bring the Hamrick group of mills in as parties defendants. It is conceded that this motion was addressed to the discretion of the lower Court, but it is submitted that the Circuit Judge erred as a matter of law in failing to hold that a complete determination of the controversy could not be had without the presence of the four mills, and in holding that whatever supposed rights other parties may have will not be adjudicated in this action.
His Honor, Judge Sease, after referring to Section 409 of the Code, which provides, among other things, that the Court may determine any controversy between parties before it, when it can be done without prejudice to the rights of others, held that the bringing in of other parties (the mills), upon the conjecture that their rights might be affected by the final determination of the issues between the plaintiffs and the defendants in this action, would tend to confusion and to obscure the real issues between the parties then before the Court. We think Judge Sease was correct in so holding, and in overruling the motion.
The plaintiffs brought this action against the principal, and the surety on his official bond, and we can see no good reason why the issues raised by the pleadings between these litigants could not be finally determined, as they were, without the intervention of any other parties or any other issues. We are of the opinion that the discretion of his Honor, Judge Sease, was wisely exercised.
Exceptions overruled, and judgment affirmed.
MESSRS. JUSTICES BONHAM and BAKER concur.
MR. ACTING ASSOCIATE JUSTICE WILLIAM H. GRIMBALL dissents.
MR. CHIEF JUSTICE STABLER and MR. JUSTICE CARTER did not participate on account of illness.
I find that I am unable to agree with the majority opinion in this cause, and I shall state, as briefly as possible, my reasons therefor.
It seems to me that the sole issue in the case is that of the proper measure of damages. And it seems to me that the tax penalty is not the measure of damages.
The record shows that the taxpayer delivered checks to the treasurer of the county on March 30, 1934. The treasurer deposited these checks several months later. There was no agreement between the taxpayer and the treasurer for any delay in depositing the checks, and they would have been honored by the drawee bank at any time if presented, and were honored when presented.
The tax penalty went into effect on May 1, 1934, thirty-one days after the checks were delivered to the treasurer.
It was, of course, the duty of the treasurer to deposit the checks when he received them, and his surety is liable for any damages sustained by the State and the county by reason of his not depositing them. The measure of damages, it seems to me, is the loss of the use of the money, and not the amount of the fictitious tax penalty which has never accrued against the taxpayer.
The purpose of tax penalties is to promote the more prompt and efficient collection of delinquent taxes, and to provide a stimulant to accelerate the painful process of collecting delinquent taxes. Webster v. Williams, 183 S.C. 368, 191 S.E., 51, 110 A.L.R., 1348.