#### STATE OF NORTH CAROLINA, on Relation of ALBERT R. THACKER, Administrator of GEORGE R. THACKER, Deceased, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND and AMERICAN SURETY COMPANY OF NEW YORK.

(Filed 20 September, 1939.)

1. Clerks of Court § 18—

Clerks of tbe Superior Court are insurers and guarantors of funds coming into their hands by virtue or color of their offices.

*1362. Same: Principal and Sui'ety § 5a—

Failure of a clerk of the Superior Court to account for funds received by virtue or color of Ms office upon demand raises the presumption that the money was misappropriated and converted upon receipt, and places the burden upon the clerk or his surety to show the contrary.

3. Principal and Surety § 5b—

An official bond of a clerk of the Superior Court is liable only for default occurring during the term for which the bond was given and cannot be held liable for default occurring during a prior or a subsequent term, even though the principal and surety on the bonds for the other terms of office be the same.

4. Limitation of Actions § 3f — Time from which statute begins to run on bond of clerk.

The statute of limitations on the bond of a clerk of the Superior Court begins to run at the time of default, which, upon failure of the clerk upon demand to account for funds received by virtue or color of his office, presumptively occurs the date the funds were received, or, upon failure of demand, default occurs upon failure of the clerk to account either to the *cestui que trust*or to the successor clerk at the expiration of the term during which the funds were received, even though the clerk succeeds himself, C. S., 439, and therefore the statute begins to run, at the latest, at the expiration of the term during which the default in fact occurs.

5. Same: Limitation of Actions § 2c — Actions against sureties on clerk’s bonds for terms expiring more than six years prior to institution of action held barred.

This action was instituted against the sureties on successive bonds of a clerk of the Superior Court to recover for loss of a part of funds paid into the hands of the clerk to the use of plaintiff’s intestate. It appeared that at the time the funds were paid into the hands of the clerk, intestate was *sui juris*and had full knowledge of the facts, and that the loss was sustained in an investment of the funds made by the clerk in good faith. It further appeared that the bonds of defendant sureties were executed for terms expiring more than six years prior to the institution of the action. *Held:*Since each of the bonds is liable only for default occurring during the term for which it was given, and since the statute of limitations began to run, at the latest, at the expiration of the said terms, the action against defendant sureties is barred by the six-year statute of limitations. C. S., 439..

6. Limitation of Actions §§ 3f, 4 — C. S., 441 (9), held not applicable in this action against sureties on clerk's bonds.

Ordinarily, the statute of limitations on the bond of a clerk of the Superior Court begins to run upon default and not upon discovery, C. S., 439, and when funds are paid into the clerk’s office to the use of a person who is *sui juris*and knows that the funds are subject to his demand, and the clerk invests such funds in good faith, the provisions of C. S., 441 (9), have no application in an action against successive sureties on the clerk’s bonds to recover the loss sustained through such investment.

*137Appeal by plaintiff from *Gwyn, J.,*at May Term, 1939, of Bock-INgham.

Affirmed.

Civil action against tbe sureties on the official bonds of the clerk of the Superior Court of Eockingham County to recover balance due on an amount received by the clerk under color of his office, which, on demand, has not been paid.

The parties waived trial by jury and the cause was tried upon stipulations of fact and such additional facts as the court might find from the evidence offered, it being agreed that the court should hear the evidence and find additional facts not incorporated in the stipulations.

From the stipulations and facts found by the court the following facts appear:

On 7 February, 1910, there was paid into the office of the clerk of the Superior Court of Eockingham County the sum of $3,226.32 to the use of George E. Thacker, who was then *sui juris.*This fund remained in the hands of the clerk and upon the appointment of Major Thomas Smith, as clerk, to fill an unexpired term, he received from his predecessor clerk, by virtue and under color of his office, $4,489.59, representing the original sum with accrued interest. On 16 July, 1926, Smith, clerk, loaned said money, together with other funds, to the Farmers’ Exchange, Inc. Said loan was evidenced by a promissory note payable to him, as clerk, and was secured by a trust deed on real estate. The loan was made without the knowledge of George E. Thacker and without any order of court authorizing the same. No portion of the principal or interest was paid by the Farmers’ Exchange, Inc., which executed an assignment for the benefit of creditors 24 May, 1928. . The deed of trust was thereafter foreclosed and plaintiff received out of the proceeds of sale, through the clerk, $2,137.29. No other funds are available out of the assets of the Farmers’ Exchange, Inc. There is now due on said fund $1,995.46, with interest from 20 February, 1937, and interest on $4,989.59 from 30 March, 1936, for which judgment has been rendered against Smith, clerk. The plaintiff, administrator, made no demand upon the clerk for the payment of said sum received by him until 30 March, 1936. Demand was then made and the clerk failed to pay any part of said sum and has paid no part thereof except the sum of $2,137.29, representing proceeds of the foreclosure sale. Thus, the estate of George E. Thacker has suffered a loss in the amount represented by the judgment against the clerk.

Major Thomas Smith was duly appointed and qualified as clerk of the Superior Court of Eockingham County 5 December, 1925, for an unexpired term of one year. Having been reelected from time to time to succeed himself, he qualified for, and served during, the terms from December, 1926, to December, 1930; from December, 1930, to December, *1381934; and from December, 1934, to December, 1938. Apparently be is acting as clerk for tbe term beginning in December, 1938.

For tbe original one-year term, beginning 5 December, 1925, said clerk gave official bond in tbe sum of $10,000 witb tbe defendant, Fidelity & Deposit Company of Maryland, as surety. For tbe term beginning on tbe first Monday in December, 1926, be gave bis official bond in tbe sum of $10,000 witb tbe defendant, American Surety Company of New York, as surety. For tbe term beginning tbe first Monday in December, 1930, be gave bis official bond in tbe sum of $10,000 witb tbe National Surety Company, as surety. For tbe term beginning tbe first Monday in December, 1934, be gave bis official bond in tbe sum of $10,000 witb tbe National Surety Corporation as surety.

Tbe said clerk at no time since bis original induction into office made tbe reports required by law to tbe board of commissioners of Rocking-ham County, and be bas failed to give an itemized statement of funds beld, witb detailed information required by statute. He bas failed to beep any book, record or list of investments, but tbe evidences of various investments made by bim were placed in a folder and kept locked in a safe in tbe vault in bis office. Tbe trust fund ledger kept by bim, wbicb included tbe fund due to George R. Tbacker, was kept in a vault in bis office open to tbe public.

In investing tbe funds beld to tbe use of plaintiff’s intestate and in doing all acts and things concerning tbe same, tbe clerk acted in good faith and there is no evidence of any misappropriation or dishonesty on tbe part of tbe clerk.

At tbe time of tbe original deposit of said fund in tbe bands of tbe clerk in 1910 to tbe use of George R. Tbacker, tbe said Tbacker bad knowledge thereof. From that date until tbe time of bis death, neither tbe plaintiff’s intestate nor anyone for bim made any demand upon tbe clerk for an accounting. Tbe plaintiff made tbe first demand 30 March, 1936.

George R. Tbacker, plaintiff’s intestate, died 1 September, 1934, and tbe plaintiff, Albert L. Tbacker, qualified as administrator of bis estate 1 October, 1934, and is now acting as such. In tbe course of tbe administration of said estate plaintiff made demand upon tbe clerk for an accounting and for tbe payment of tbe sum due tbe estate. Thereafter, plaintiff obtained judgment against tbe clerk for tbe balance due, after crediting tbe amount received from tbe proceeds of tbe foreclosure sale. Tbe clerk having failed to account and pay over tbe amount due, tbe plaintiff instituted this action 31 January, 1939.

Upon tbe facts stipulated and found by tbe court, tbe court entered judgment: (1) That no default or loss occurred during tbe term covered by tbe bond executed by tbe defendant, Fidelity & Deposit Company of *139Maryland; (2) that no default or loss occurred during tbe term coyered by tbe bond executed by tbe defendant, American Surety Company of New York; (3) that if default or loss occurred during tbe term covered by either bond tbe facts constituting tbe fraud or mistake were not discovered prior to 30 March, 1936, tbe date of tbe demand; (4) that from an examination based exclusively upon tbe records in tbe office of tbe clerk of tbe Superior Court, neither tbe plaintiff nor bis intestate, by tbe exercise of due diligence and reasonable prudence, could have discovered tbe default, fraud or mistake at any time prior to tbe institution of this suit; (5) that by due diligence and reasonable business prudence tbe plaintiff and tbe plaintiff’s intestate could have discovered tbe default, fraud or mistake three years prior to tbe institution of tbe action; (6) that tbe plaintiff’s cause is barred by tbe statute of limitations; and, (7) that plaintiff’s action be dismissed at tbe cost of tbe plaintiff.

Tbe plaintiff excepted and appealed.

*Hunter K. Penn and D. F. Mayberry for plaintiff, appellant.*

*Smith, Wharton & Hudgins for defendants, appellees.*

Barnhill, J.

Is tbe plaintiff’s alleged cause of action against tbe defendants barred by tbe statute of limitations, C. S., 439? If this question presented by this appeal is answered in tbe affirmative — as it must be — it is unnecessary for us to discuss or decide whether tbe admitted default of tbe clerk occurred during either of tbe terms covered by tbe bonds executed by tbe defendants.

Tbe clerk of tbe Superior Court is an insurer and guarantor of funds “which have come, or may come, into bis bands by virtue of color of title,” *Pasquotank County v. Surety Co.,*201 N. C., 325, 160 S. E., 176; *Gilmore v. Walker,*195 N. C., 460, 142 S. E., 579; *Marshall v. Kemp,*190 N. C., 491, 130 S. E., 193; *Williams v. Hooks,*199 N. C., 489, 154 S. E., 828; *Smith v. Patton,*131 N. C., 396, and tbe surety upon bis official bond must account for any default by tbe clerk during tbe term for which tbe bond was executed. *Gilmore v. Walker, supra,*and other cases cited.

Failure of tbe clerk to account for funds received by virtue or color of bis office upon demand raises tbe presumption that tbe money was misappropriated and converted upon receipt, and tbe burden is upon tbe clerk or bis surety to “show tbe contrary.” *Gilmore v. Walker, supra; Pasquotank County v. Surety Co., supra; Williams v. Hooks, supra.*

Failure to account, upon demand made during tbe term tbe fund was received, constitutes default which starts tbe running of tbe statute of limitations, presumptively from tbe date tbe fund was received. In tbe absence of such demand, failure by tbe clerk to account for funds re*140ceived by virtue or under color of bis office at tbe end of tbe term during wbicb tbe fund was received constitutes a default and is a breach of bis official bond. *Washington v. Bonner,*203 N. C., 250, 165 S. E., 683. If tbe clerk accounts for and pays over to bis successor funds received by bim under color of bis office, there is no breach of bis official bond executed to cover tbe period of that particular term.

An official bond executed for a specified term is not liable for defaults of tbe principal during another term. A bond for one term is not liable for tbe nonperformance of tbe official duties of tbe principal during another and different term, even though tbe principal and sureties be tbe same for -both terms. Tbe two terms are separate and distinct and tbe bonds given by an officer, as security for tbe performance of bis official duties during one term may not be held liable for derelictions occurring in another and different term. Each term “must stand on its own bottom.” *Ward v. Hassel,*66 N. C., 389; *S. v. Martin,*188 N. C., 119, 123 S. E., 631.

Tbe statute of limitations begins to run upon default and not upon discovery. *Bank v. McKinney,*209 N. C., 668, 184 S. E., 506. This statute (C. S., 439) is applicable to tbe clerk of tbe Superior Court and tbe surety upon bis official bond. *Lee v. Martin,*186 N. C., 127, 118 S. E., 914; *Vaughan v. Hines,*87 N. C., 445.

Thus, it appears that if there is a default it presumptively occurred at tbe time tbe money was received. If it is shown to tbe contrary, it occurred at tbe time established by tbe evidence, or in any event, when tbe clerk who bad received tbe fund fails to account therefor to tbe successor clerk, even though be is tbe successor. There is no default, and tbe statute does not begin to run, so long as tbe clerk faithfully accounts for tbe fund in bis bands either to tbe *cestui que trust*or to tbe successor clerk. Therefore, tbe statute of limitations begins to run, at tbe latest, at tbe expiration of tbe term during wbicb tbe default, in fact, occurred.

Under these well established principles of law relating to official bonds of public officers and to tbe statute of limitations in respect to actions upon official bonds, it appears that if there was any default by tbe clerk during tbe term for wbicb tbe defendant, Fidelity & Deposit Company of Maryland, became surety upon bis official bond, tbe statute of limitations against any action upon said bond began to run, at tbe latest, on tbe first Monday in December, 1926, when Smith, clerk, qualified as successor for tbe four-year term ending on tbe first Monday in December, 1930, more than twelve years prior to tbe institution of this action. If there was any default during the four-year term ending on tbe first Monday in December, 1930, upon tbe official bond for wbicb tbe defendant, American Surety Company of New York, was surety, tbe statute *141began to run, at the latest, at tbe expiration of that term, on the first Monday in December, 1930, more than eight years prior to the institution of this action. As the statute provides a six-year period within which actions must be instituted upon official bonds, it follows that as to each of the defendants, plaintiff’s action is barred.

The provisions of C. S., 441 (9), have no application to this case. It is admitted that the deceased was *sui juris*and that he at all times knew that the subject matter of this litigation was in the hands of the clerk, subject to his demand. No fraud or mistake is alleged or proven and the court below found that Smith, clerk, at all times acted in good faith.

This is one of those cases which present facts which are incomprehensible. More than $3,000 was paid into the hands of the clerk of the Superior Court of Eockingham County to the use of George E. Thacker in 1910. He had full knowledge thereof and yet he made no demand upon the then clerk, or his successors in office, for principal or interest at any time during his lifetime. The loss admittedly sustained is quite apparently attributable, in part at least, to the negligence of plaintiff’s intestate.

The judgment below is

Affirmed.