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GREAT AMERICAN INDEM. CO. v. GARRISON

February 20, 1948

GREAT AMERICAN INDEMNITY CO. OF NEW YORK
v.
GARRISON et ux.



The opinion of the court was delivered by: DRIVER

Plaintiff, a New York Corporation, brought this action to recover from the defendants, individually, and as a marital community, money paid and expenses incurred, as surety, on the official bond of the defendant husband, Lyall L. Garrison, as the Treasurer of Clearwater County, Idaho.

The defenses tendered by the pleadings and the evidence are that the action is barred by the statute of limitations and that, in any event, the plaintiff is not entitled to recover from the marital community, or from the defendant wife.

 The facts essential to a determination of the issues presented are virtually undisputed. Briefly stated, they are as follows:

 Defendant, Lyall L. Garrison, was elected County Treasurer in 1932, and took office in January, 1933. He was re-elected and served successive, two-year terms, the last of which expired in January, 1945. Until January, 1941, his statutory, official bond was in the amount of $ 25,000, and the surety was a company other than plaintiff. At that time, his bond was increased to $ 50,000, and he executed an additional, official bond in the amount of $ 25,000, with plaintiff as surety. A bond in like amount, with plaintiff as surety, was furnished by Mr. Garrison for his last term of office, 1943-1945. Each bond was conditioned that he would faithfully perform all of his official duties and pay over all monies that might come into his hands by virtue of his office.

 After the expiration of his last term, it was discovered that he was short in his accounts. An audit of his books showed that the shortage amounted to $ 27,794.52. Upon demand of Clearwater County, plaintiff paid its portion of the shortage, amounting to $ 13,897.26, on August 20, 1945.

 At the trial, a public accountant, who had audited the books and records of Clearwater County each year during Mr. Garrison's incumbency as County Treasurer, testified that it was impossible to determine when, or how, the shortage occurred. The only other evidence on that point was the testimony of Mr. Garrison. He testified that some time during the year, 1936, he became aware that there was a shortage of approximately $ 12,000 in his accounts; that he had not taken any County funds, and did not know how the shortage occurred; that he concealed it in one way and another so that it was not discovered; and that in 1941, in a desperate effort to make up the shortage, he took $ 16,000 of County funds, went to Reno, Nevada, and there lost it all at the gaming tables of public gambling houses.

 The defendants were husband and wife during all the time that Mr. Garrison served as Treasurer of Clearwater County. There was no evidence that the marital community ever benefited directly, or indirectly, from any County funds, taken by the husband.

 Mr. Garrison's bond application, which was signed by him, but not by his wife, contained an agreement on his part: ' * * * to indemnify the Company (plaintiff) against any losses, damages, costs, charges, and expenses it may sustain, incur, or become liable for in consequence of the said bond, or any renewal thereof, or any new bond issued in continuation thereof or as a substitute therefor;'

 Plaintiff instituted the present action on August 7, 1946. Defendants contend that the action is based upon a breach of the statutory duty of a County Treasurer, and, therefore, is governed by the three-year statute of limitations of the State of Washington. The statute, they maintain, commenced to run at the end of the term of office in which the cause of action arose. As supporting authority, they cite Pierce County v. Newman, 26 Wash.2d 63, 173 P.2d 127. The contention is based upon a misconception of the nature of the instant action, and the case is not in point. There, the County sued the Treasurer and the surety on his official bond. Here, the surety is suing the principal for reimbursement. In the present case, the cause of action accrued, and the statute of limitations began to run from the time the surety made the payment to Clearwater County. 50 Am.Jur.,Suretyship, Sec. 242; Restatement, Restitution, Sec. 77b. Plaintiff made that payment on August 20, 1945, and started its suit on August 7, 1946. In view of the abovequoted, written contract, embodied in the bond application, the action would seem to be governed by the six-year statute of limitations, Rem. Rev. Stat. Sec. 157, but if it be regarded as an action based upon an implied contract of a principal to reimburse his surety, then the three-year statute of limitations would apply, Rem. Rev. Stat. Sec. 159. In either case, the action was brought within the time limited by law.

 However, inherent in the situation here presented is the question whether at the time plaintiff paid the claim of Clearwater County, Mr. Garrison could have set up the statute of limitations as a defense to the whole, or a portion, of the claim. If a good defense existed, and was available to and known by the surety, it might well be urged that the surety, having failed to assert it, could not recover reimbursement from the principal on that portion of the claim then barred by limitation. See Restatement, Security, Sec. 108. Whether such a valid defense existed would depend upon the law of the State of Idaho. Mr. Garrison was elected and served his terms of office as Clearwater County Treasurer in that State; his official bond ran to the State; his official misconduct, which was the basis of the County's claim, occurred there; and it was there that demand for payment was made by the County upon the plaintiff, as surety on the bond.

 In Idaho, an action against a public officer for loss of public funds in his custody is regarded as one grounded upon a liability created by statute and subject to the limitation imposed by Section 5-218, subparagraph 1, Idaho Code Annotated. The period of limitation is three years, and it commences to run at the expiration of the officer's term of office. Wonnacott v. Kootenai County, 32 Idaho 342, 182 P. 353; Canyon County ex rel. Griffiths v. Moore, 34 Idaho 732, 203 P. 466; City of St. Anthony v. Mason, 49 Idaho 717, 291 P. 1067.

 The cited cases do not squarely decide whether the statute always starts to run at the expiration of the term of office in which the loss occurred, or, in case the offending officer has served two or more consecutive terms, at the end of his last term, where the loss was not discovered or discoverable by the exercise of reasonable diligence prior to that time. It is not necessary to decide the point here.

 As stated above, there is no evidence as to how, or when, $ 12,000 of Mr. Garrison's shortage occurred. He testified at the trial that he discovered it some time during the year, 1936. (In a written confession, dated March 27, 1945, in evidence as an exhibit, he recited that the shortage first came to his attention 'some time during the business year of 1935.') As trier of the facts, the Court has applied the usual standards in determining the weight to be given Mr. Garrison's testimony. Among other things, the Court has considered his interest, as a party, in the outcome of the case, the impeaching effect of the record showing of his conviction of the felony of embezzlement, and the vagueness as to detail and the inherent improbability of his story with reference to the mysterious disappearance of the $ 12,000 of County funds. The Court does not believe his wholly uncorroborated testimony that upon discovering a shortage of $ 12,000 in his accounts, for which he was in no way to blame, he failed to disclose it to any one, but on the contrary, invited eventual, criminal prosecution by fraudulently concealing it year after year. As to that portion of the missing funds, the Court takes the view that the time of their loss is not satisfactorily shown by the evidence. The presumption, then, arises that the shortage occurred during Mr. Garrison's last term of office, which expired in January, 1945. 43 Am.Jur.,Public Officers, 449. As to the remaining $ 16,000 of the shortage, it will be assumed that Mr. Garrison took it, as he testified that he did, in June, 1941. The term of office, which he was then serving, expired in January, 1943. Payment, upon demand of the County, was made by the plaintiff in August, 1945. The County's claim was not, therefore, at that time barred, in whole or in part, by the applicable three-year statute of limitations.

 The plaintiff seeks to recover judgment against the marital community consisting of defendants, Lyall L. Garrison and Georgia C. Garrison, his wife, as well as against Mr. Garrison, individually. Under the Community property laws of the State of Washington, the marital community is not a separate, legal entity, or juristic person, apart from the individual spouses, who compose it. Bortle v. Osborne, 155 Wash. 585, 285 P. 425, 67 A.L.R. 1152. However, where the wife is made a party to an action against the husband, the question of the community character of the debt, or obligation, may be ...


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