Farmers' State Bank v. Title Guaranty & Trust Co.

• Decision Date: 16 November 1908
• Court: Missouri Court of Appeals
• Parties: FARMERS' STATE BANK OF SOUTH GREENFIELD v. TITLE GUARANTY & TRUST CO. OF SCRANTON, PA.

113 S.W. 1147

133 Mo. App. 705

FARMERS' STATE BANK OF SOUTH GREENFIELD v. TITLE GUARANTY & TRUST CO. OF SCRANTON, PA.

Kansas City Court of Appeals. Missouri.

November 16, 1908.

Rehearing Denied December 7, 1908.

1. INSURANCE (§ 430)—GUARANTY AND INDEMNITY INSURANCE—BREACH OF CONTRACT GUARANTEED.

Under a bond binding the obligor to reimburse an employer for pecuniary loss sustained by reason of fraud or dishonesty of an employé amounting to embezzlement or larceny, mere fraud or dishonesty not amounting to embezzlement or larceny did not render the obligor liable.

2. INSURANCE (§ 430)—GUARANTY AND INDEMNITY INSURANCE—DEFAULT OR MISCONDUCT OF EMPLOYÉ—EMBEZZLEMENT—SUFFICIENCY OF EVIDENCE.

A bank cashier who was a silent partner in a produce concern allowed his partner to check on certain drafts drawn by the latter on another firm for produce before the drafts were paid. The drafts being returned unpaid, the cashier canceled them, and allowed his partner to draw and deposit other drafts in their place, crediting the first ones by the last. These drafts were also returned unpaid. There was no evidence that the drafts were wrongful, or of an intent on the cashier's part to convert the funds of the bank to his own use, or to the use of his firm. Held not to constitute embezzlement under an indemnity bond against dishonesty or fraud amounting to embezzlement.

Appeal from Circuit Court, Dade County; J. B. Johnson, Judge.

Action by the Farmers' State Bank of South Greenfield, Mo., against the Title Guaranty & Trust Company of Scranton, Pa. Judgment for plaintiff, and defendant appeals. Reversed.

Thos. H. Sprinkle and S. A. Payne, for appellant. E. J. White and E. P. Mann, for respondent.

BROADDUS, P. J.

The plaintiff is an incorporated bank under the laws of this state, located in Greenfield, Dade county. On the 27th day of July, 1905, one H. C. Woolf was elected its cashier and entered upon the discharge of his duties as such on the 12th day of August following. Prior thereto he applied to the defendant to make his bond to the plaintiff in the sum of $10,000. The application was in writing, and signed by Woolf and E. H. Daughtry, a director of the bank. The defendant executed the bond applied for in consideration of a premium of $30 paid by the bank and the same was delivered to its president, whereupon Woolf at once assumed the duties of cashier. The principal condition of the bond reads as follows: "Now, therefore, this bond witnesseth: That, for the consideration of the premises, the company shall during the term above mentioned, or any subsequent or renewal of such term, and subject to the conditions and provisions herein contained, at the expiration of three months next, after proof satisfactory to the company, as hereinafter mentioned, make good and reimburse to the said employer such pecuniary loss as may be sustained by the employer by reason of the fraud or dishonesty of the said employé in connection with the duties of his office or position, amounting to embezzlement or larceny. * * *" Prior to the time that Woolf became cashier, one Ed I. Myers was engaged in the produce business. He started with a capital of $250. Without the knowledge of the bank, Woolf became a partner of Myers, he having put into the concern the sum of $500, which made him two-thirds the owner of the business. The business was conducted under the name of Myers; Woolf being a silent partner. When the bank opened on the 12th day of August, Myers began with two accounts, one in the name of "Ed I. Myers, private," under which he carried his personal account, and the other in the name of "Ed I. Myers," under which was carried this partnership account of Myers and Woolf. These accounts were kept by Woolf as cashier. It was shown that Woolf counseled and advised Myers in relation to these partnership affairs. On October 9, 1905, Myers made a draft for $1,500 on B. W. Redfern & Co., St. Louis, which was deposited to his credit and upon which he was allowed to check before any returns were received from the draft. On October 17th Myers drew another draft on the St. Louis concern for $1,200, which was also deposited to his credit, and upon which he was allowed to check before any returns from the same had been received. Both these drafts were indorsed: "No protest." The second draft was accepted by the drawee on October 19, 1905. Both were returned unpaid. The first was returned to and received by the bank on October 20, 1905, and the second on October 28, 1905. On the return of the first draft for $1,500, Woolf, upon the assurance of Myers that there was some mistake about the matter, allowed Myers on October 26th to draw and...