Edgewater Nat. Bank v. Safeguard Ins. Co.

• Decision Date: 04 December 1963
• Docket Number: No. A--756,A--756
• Citation: 81 N.J.Super. 383,195 A.2d 653
• Parties: EDGEWATER NATIONAL BANK, a Banking Corporation, Plaintiff-Respondent, v. SAFEGUARD INSURANCE COMPANY, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 383

81 N.J.Super. 383

195 A.2d 653

EDGEWATER NATIONAL BANK, a Banking Corporation, Plaintiff-Respondent, v. SAFEGUARD INSURANCE COMPANY, Defendant-Appellant.

No. A--756.

Superior Court of New Jersey

Appellate Division.

Argued Nov. 12, 1963.

Decided Dec. 4, 1963.

Milton T. Lasher, Hackensack, for plaintiff.

Marshall Selikoff, Newark, for defendant (Jung & Selikoff, Newark, attorneys).

Before Judges GAULKIN, FOLEY and LEWIS.

The opinion of the court was delivered by

GAULKIN, S.J.A.D.

Plaintiff sued on a theft policy. The case was submitted to the Law Division upon a stipulation of facts. The court entered judgment for plaintiff and defendant appeals.

Plaintiff's brief sets forth the following summary of the stipulation, and defendant does not dispute its accuracy:

'Defendant, Safeguard, issued an automobile insurance policy covering a 1960 Rambler, naming the Romar Taxi Service, Inc. (hereafter Romar) as the insured, and recognizing the plaintiff, Edgewater, as holding an encumbrance thereon, and agreeing to insure it to the extent of its interest.

The policy contained the following provisions:

'Coverage D--Theft (Broad Form):

To pay for loss of or damage to the automobile, hereinafter called loss, caused by theft, larceny, robbery or pilferage.'

(Excluding):

'* * * loss due to conversion, embezzlement or secretion by any person in possession of the automobile under a bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance.'

Romar's officers and stockholders were the following:

President: Robert Limburg--49 shares;

'Vice-President: Margaret M. Limburg--2 shares;

Secretary and Treasurer: Harriet Limburg--49 shares.

The total shares of stock issued were 100.

Upon the application of Robert and Harriet Limburg, President and Secretary and Treasurer respectively, Edgewater loaned Romar $4,756.42 on November 29, 1960 to be repaid in installments * * *.

In consideration of the loan Romar issued its promissory note executed by Robert and Harriet Limburg, in their capacities as officers of the corporation and individually. Additionally, Romar executed (an) Agreement in consideration of the loan placing the 1960 Rambler and a 1955 Dodge as security. Robert and Harriet Limburg executed the * * * Agreement as corporate officers of Romar.

Robert Limburg operated the 1960 Rambler in the business of the corporation. Romar defaulted in the loan payment in May 1961 with no payments made thereafter. During the month of June 1961 Robert Limburg took the 1960 Rambler and has not returned to New Jersey, being last seen in Texas. The Rambler at the time of taking was worth $1450.00.'

Defendant's appeal is based upon two propositions. The first is that this was not theft, larceny or pilferage within the meaning of the policy. The second is that, since Limburg was president and a half-owner of the corporation and personally endorsed Romar's note to plaintiff, he was a 'person in possession of the automobile under a bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance.'

Defendant's argument that this was not 'theft' within the meaning of the policy is predicated upon certain language contained in Stewart v. Home Fire & Marine Ins. Co. of California, 124 A. 773, 2 N.J.Misc. 515 (Sup.Ct.1924). However, that case has no bearing on the case at bar, for its facts are completely different from those before us.

In that case Stewart was the conditional vendor and Straus the conditional vendee of a certain automobile. The policy was issued in the name of both, as their respective interests might appear, insuring them against 'theft, robbery or pilferage, excepting, however, the wrongful conversion or embezzlement by the vendee in possession under a conditional sale agreement.'

The conditional sale contract forbade Straus from selling the car without Stewart's permission. Nevertheless, Straus sold it to one Schane. When Stewart learned of this, he demanded the car of Schane, who, after some delay, delivered it to Stewart. Stewart nevertheless sued the insurance company, claiming that these facts demonstrated a theft within the terms of the policy. The court held that it did not. It said that Schane had not stolen the car but had purchased it in good faith, 'and, if it be assumed that the transaction involves criminality on the part of Straus, what he did amounted to an embezzlement, which is a fraudulent conversion of property by the possessor after its possession has been lawfully acquired * * *,' excluded from coverage 'by the excerpt from the policy which we have above recited, namely, that the embezzlement or secretion by the vendee in possession * * * shall not render the company liable under the clause of the policy insuring against theft.'

Defendant seizes upon the statement in Stewart that 'Theft, or larceny, involve(s) the idea of a knowingly unlawful acquisition of property; that is, a felonious taking of it from one who has both the actual possession and the apparent right of possession.' That is generally true, but it was said with reference to the facts and issues before the court in Stewart. Cf. State v. Trunfio, 58 N.J.Super. 445, 156 A.2d 486 (App.Div.1959). The court did not undertake, in Stewart, to lay down a definition of theft intended to control future cases in which the facts were different.

Defendant argues that Limburg's taking of the car was not theft but embezzlement because Limburg had 'rightful possession before conceiving a fraudulent intent,' and the words 'theft, larceny, robbery or pilferage' may not be construed to include embezzlement. Defendant says that the fraudulent taking of corporate property by an officer was embezzlement at common law, and today it is punished under Chapter 102 of Title 2A of our statutes, which deals with 'Embezzlement, Conversion and Misappropriation.' N.J.S. 2A:102--3, N.J.S.A.

The stipulation contains no facts which bring this case within the rationale of Miller & Dobrin Furniture Company, Inc. v. Camden Fire Insurance Company Association, 55 N.J.Super. 205, 150 A.2d 276 (Law Div.1959), nor does defendant so claim. Therefore, insofar as the issues of this case are concerned, the relationship of Limburg to the insured car was the same as that of any employee who is placed in charge of a vehicle to be operated upon his employer's business.

It has often been said that an employee has custody of his employer's property, and not possession, and therefore his felonious taking may be larceny. 32 Am.Jur., Larceny § 56, p. 958; Gibson v. St. Paul Marine Fire Ins. Co., 117 W.Va. 156, 184 S.E. 562 (Sup.Ct.App.1936); Henley v. State, 59 Ga.App. 595, 2 S.E.2d 139, 142 (Ct.App.1939); McGraw v. State, 142 Tex.Cr.R. 432, 154 S.W.2d 645, 647 (Crim.App.1941). However, we prefer not to base our decision on any such narrow ground.

To begin with, the policy does not exclude all conversions, embezzlements and secretions but only those by one 'in possession under a bailment lease, conditional sale, purchase agreement or other encumbrance.' Under well settled rules governing the construction of contracts generally, and insurance contracts in particular, the insurance companies, having indicated which embezzlements are excluded, may be held to have agreed that all other embezzlements come within the term 'theft,' and are covered. Appleman says (5 Insurance Law & Practice, § 3212, p. 357 (1941)):

'And where a policy insures against theft, excepting from its operation loss of a certain type, such as embezzlement by mortgagor or vendee in possession, losses not falling within that specifically excepted class are covered so as to render the insurer liable for embezzlement by other persons.'

See also 5A Am.Jur., Automobile Insurance, § 47, p. 50 (1956).

Limburg was not in possession under a bailment lease, conditional sale, purchase agreement or other encumbrance. Title to the car was in Romar, and the pledge of that title to plaintiff was by Romar. Limburg had no property right whatever in the car. The fact that Limburg endorsed Romar's note is immaterial. If Limburg did have 'possession,' rather than 'custody,' his possession was as an officer-employee of the corporation, and not by virtue of the contract between Romar and the plaintiff. Cf. General Public Loan Corp. v. Director of Division of Taxation, 13 N.J. 393, 99 A.2d 796 (1953); Hancock v. Board of Review, 46...