Crescent Cigar & Tobacco Co. v. National Casualty Co.

• Decision Date: 11 June 1934
• Docket Number: 14738
• Citation: 155 So. 505
• Parties: CRESCENT CIGAR & TOBACCO CO. v. NATIONAL CASUALTY CO
• Court: Court of Appeal of Louisiana — District of US

155 So. 505

CRESCENT CIGAR & TOBACCO CO. v. NATIONAL CASUALTY CO

No. 14738

Court of Appeal of Louisiana, Orleans.

June 11, 1934

Writ of certiorari denied Aug. 3, 1934.

Deutsch & Kerrigan & Burke, of New Orleans, for appellant.

Deynoodt & De La Vergne, of New Orleans, for appellee.

OPINION

JANVIER Judge.

Plaintiff, Crescent Cigar & Tobacco Company, a corporation engaged in the sale of merchandise, employed Lester Bunch as a "peddler" or traveling salesman, furnishing to him a stock of merchandise and an automobile truck. At the end of each day Bunch was required to return to the office or warehouse of plaintiff company and to surrender such cash as he had received during the day and to replenish his stock in accordance with his anticipated needs.

After several months an inventory and a complete accounting was had, and it then developed that the said Bunch had failed to account for merchandise for which, if sold, he should have received the additional sum of $ 291.97.

National Casualty Company, defendant, had issued to the plaintiff a fidelity bond which contained a paragraph reading as follows:

"The National Casualty Company, as surety, binds itself to pay to the Crescent Cigar & Tobacco Company, as employer, such pecuniary loss as the employer shall have sustained of money or other personal property (including that for which the employer is responsible) through any act or acts of Fraud Dishonesty, Forgery, Theft, Embezzlement, Wrongful Abstraction or Willful Misapplication committed by any employee of the employer occupying any position named in the notice of acceptance attached or subsequently added hereto and hereby made a part of this bond, directly or through connivance with others subsequent to the date specified in said notice of acceptance, etc."

Plaintiff contends that the loss thus sustained was the result of one of the acts against which the said policy or bond was issued, and which said acts are set forth in the above-quoted paragraph of the bond.

Defendant denies that the loss resulted from one of the said risks.

In the district court there was judgment against the insurer, and it has appealed. Plaintiff-appellee also complains of the judgment charging that there should have been an additional award for attorney's fees and for the penalty permitted under Act No. 37 of 1921 (Ex. Sess.).

Plaintiff, declaring that there is necessity for interpreting the language of the above-quoted paragraph of the bond, calls our attention to many authorities holding that where, in a policy of insurance, there is ambiguity, doubt as to the interpretation should be resolved in favor of the insured and against the insurer, because of the fact that such policies are prepared by the insurers. But there is no necessity for an interpretation of this bond or policy. We find no ambiguity in it. It very plainly specified the various acts against the risk of loss by which the insurer agrees to indemnify the insured. Those acts are fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, or willful misapplication.

The question thus is whether the loss sustained here was caused by one or more of the said specified acts.

There is in the record no evidence whatever as to how the shortage occurred. Bunch denies that he, himself, took any of his employer's goods or money. He cannot account for the shortage, and claims that he knew nothing about it until it was discovered as a result of the inventory and audit.

The employer offered no proof that there was any dishonest act on the part of Bunch, but maintains that there was no way in which any of the articles could have been abstracted from the truck by any third person; that the goods could not have been lost or destroyed; and that, consequently, in the absence of any explanation it must be presumed that there was some unlawful act on the part of Bunch; some such act as is specified in the policy.

Thus an analysis of the argument on behalf of plaintiff shows that no contention is made that the bond offered protection against anything other than a willfully wrongful act of the employee, and the theory on which plaintiff hopes to recover is that there is no other possible conclusion from the evidence than that the shortage results from such willful, fraudulent, unlawful acts.

Our brother of the district court adopted this view, and said:

" (3)5C The proof is absolute that of the $ 8600.00 worth of merchandise entrusted to Bunch, he failed to account for $ 291.97 thereof, and it seems to me that the conclusion and presumption, juris et de jure, is that he converted that to his own use or embezzled it."

Our inability to agree with this view results from two propositions of law: First, that a policy which insures against dishonest acts affords no protection against loss resulting from carelessness, noncriminal stock shortages, or other losses not due to dishonesty; and, second, that the burden of showing that the loss occurred as the result of one of the risks insured against is on him who claims under the policy. The proposition that a policy such as this affords no protection against unexplained stock shortages nor against carelessness of the employee, nor, in fact, against anything other than dishonest acts, is firmly established. Salley v. Globe Indemnity Company, 133 S.C. 342, 131 S.E. 616, 617, 43 A. L.R. 971, is a much cited case on the subject. We quote from the decision in that case:

"The words in the bond are "fraud, dishonesty, forgery theft, embezzlement, wrongful abstraction, or willful misapplication.' It is plain that mere negligence or carelessness will not be sufficient to hold the surety under this bond. This is apparent from even a casual reading of the words. The language used implies positive acts of wrongdoing. The authorities are equally as positive and to the point. "Thus a loss resulting from the employee's carelessness or inattention to business, or other acts or omissions, not fraudulent or dishonest, imposes no liability on the insurer.' 25 Corpus Juris, pp. 1093, 1094; Monongahela Coal Co. v. Fidelity & Deposit Co., 94 F. 732, 36 C.C.A. 444; State Bank v. Hartford Accident, etc., Co., 28 Pa. Dist. R. 847; Sinclair v. National Surety Co., 107 N.W. 184, 132 Iowa 549; Kansas Flour Mills Co. v. American Surety Co., 158 P. 1118, 98 Kan. 618. "Surety bond, indemnifying principal against loss sustained by fraud or misapplication of agent, does not extend to loss by simple mistake of agent without fraud in paying for merchandise.' Kansas Flour Mills Co. v. American Surety Co., 158 P. 1118, 98 Kan. 618. "Where a fidelity bond insured the obligee as principal against loss through the personal dishonesty of its factor, the mere failure of the factor to turn over to the principal on demand property belonging to him, or the proceeds thereof, is not a breach of the bond rendering the surety company liable.' Sinclair v. National Surety Co., 107 N.W. 184, 132 Iowa 549. There are more cases to the same effect cited on pages 1094 and 1095 of volume 25 of Corpus Juris." In Louis Pizitz Dry Goods Company v. Fidelity & Deposit Company, 223 Ala. 385, 136 So. 800; Seelbinder v. American Surety Company, 155 Miss. 21, 119 So. 357, and ...