Forest City Bldg. & Loan Ass'n v. Davis

• Decision Date: 09 June 1926
• Docket Number: 530.
• Parties: FOREST CITY BUILDING & LOAN ASS'N v. DAVIS et al.
• Court: North Carolina Supreme Court

133 S.E. 530

192 N.C. 108

FOREST CITY BUILDING & LOAN ASS'N v. DAVIS et al.

No. 530.

Supreme Court of North Carolina

June 9, 1926

Appeal from Superior Court, Rutherford County; W. D. Siler, Special Judge.

Action on employés fidelity bond by the Forest City Building & Loan Association against William J. Davis and the Massachusetts Bonding & Insurance Company. Judgment for plaintiff, and defendant Massachusetts Bonding & Insurance Company appeals. Modified and affirmed. No error.

In action on employee's fidelity bond, testimony that employee credited himself with deposit of checks he received for employer but did not charge himself with checks, and that he was not entitled to credit for deposit, held admissible on issue of amount embezzled.

Action to recover of defendant William J. Davis a sum of money alleged to have been embezzled by him, while employed as secretary and treasurer of plaintiff, and to recover of defendant bonding and insurance company the maximum amount which it had, by its bond, agreed to pay plaintiff to reimburse it for loss sustained by said embezzlement.

Issues submitted to the jury were answered as follows:

"(1) Was the bond issued by defendant bonding company, to the plaintiff building and loan association as alleged in the complaint? Answer: Yes.

"(2) Did the defendant Davis embezzle the funds of the plaintiff as alleged in the complaint? Answer: Yes.

"(3) If so, in what amount did the defendand Davis embezzle the funds of the plaintiff? Answer: $3,202.

"(4) Did plaintiff, upon discovery of the embezzlement of its funds by defendant Davis, give immediate notice of the same to the bonding company? Answer: Yes.

"(5) Did plaintiff comply with the conditions of the bond with respect to furnishing the itemized statement as provided for therein? Answer: Yes."

From the judgment upon this verdict, that plaintiff recover of defendant Davis the sum of $3,202, with interest from August 1, 1921, and of defendant bonding and insurance company the sum of $2,000, the maximum amount of the bond, with interest from August 1, 1921, defendant bonding and insurance company appealed.

J. F. Flowers, of Charlotte, for appellant bonding and insurance company.

R. R. Blanton, of Forest City, and Ryburn & Hoey, of Shelby, for appellee.

CONNOR J.

On September 3, 1919, defendant William J. Davis was in the employment of plaintiff as its secretary and treasurer. On said date defendant bonding and insurance company executed as surety, with defendant Davis as principal, a bond, by which said company, in consideration of the payment of the premium as therein recited, agreed that, subject to the conditions of the bond, it would, within three months next after proof of loss had been furnished to it, reimburse plaintiff to an amount not exceeding $2,000, for such pecuniary loss of money, securities, or other personal property as plaintiff might sustain by any embezzlement of said Davis while in the performance of the duties of his said office or position, which was committed during the life of the bond, and discovered within six months after the retirement of said Davis from the service of plaintiff. Among other conditions, which it is expressly stipulated in the bond shall be conditions precedent to a recovery thereunder, it is provided that, "immediately after becoming aware of any act or omission which may be made the basis of a claim hereunder," plaintiff shall notify said bonding company, and "within three months after such discovery file with the surety at its home office an itemized statement of claim sworn by the employer, and shall produce, for investigation by the surety at the home office of the employer, all books, vouchers, and evidence, within the control of the employer, requested by the surety." It is admitted that this bond was continued in full force and effect by the issuance of a renewal certificate, until August 1, 1921.

Evidence offered by plaintiff tended to show: That defendant Davis retired from its service, as secretary and treasurer, on August 1, 1921. That during the latter part of July, 1921, an auditor, employed by plaintiff, made an audit of the books and records of plaintiff. That on September 14, 1921, as a result of said audit, which, however, was not accepted by plaintiff as full and correct, plaintiff notified defendant by letter addressed to defendant at Boston, Mass., that it appeared that said Davis was short in his accounts, as secretary and treasurer. That thereafter, acting under the instructions of the general agent of defendant, residing at Charlotte, N. C., plaintiff had a competent and experienced auditor to make a thorough and complete audit of the books and records. That, by reason of the nature of plaintiff's business, and the condition of its books and records, as kept by defendant Davis, considerable time was necessarily consumed in making said audit. That during this time plaintiff was in correspondence with the general agent of defendant at Charlotte, N. C., in regard to the audit and its claim. That on January 12, 1922, the audit having been completed and accepted by plaintiff, a statement of the shortage in the accounts of defendant Davis, as secretary and treasurer, verified by the president and secretary-treasurer of plaintiff, was mailed to the general agent of defendant at Charlotte, N.C. Said statement shows the shortage to consist of the following items:

Installments received and not accounted for	$2,664 65
Shortage in loan account	378 08
Shortage in cash account	200 92
	---------
Total	$3,243 65

On January 27, 1922, the defendant acknowledged receipt of plaintiff's letter, dated January 12, 1922, with verified statement inclosed. In this letter plaintiff is advised by defendant as follows:

"What we require is an itemized statement setting forth the charge against the principal. What you have heretofore sent us is merely the amount of the total, and does not give details."

Further correspondence between plaintiff and defendant was had. Defendant having failed to pay plaintiff's claim, summons in this action was issued, after the expiration of three months, and before the expiration of twelve months, as required by the terms of the bond, in order that recovery could be had upon the bond.

There was evidence that the net shortage of defendant Davis in the installment account, as charged to him by the auditor, was $2,676.65. Two checks were offered in evidence, referred to in the testimony of the witnesses as the Bradley checks aggregating $2,732.65. Both of these checks were payable to plaintiff; both properly indorsed were deposited in bank by Davis to the credit of plaintiff. There was evidence that neither of these checks was entered by Davis on the books of plaintiff. The checks were given to Davis in payment of stock. The amount of both checks was included in the total amount of the shortage in the installment account, as charged by the auditor to Davis. Witnesses were permitted to testify, over objection of defendant, that, as Davis had credited himself with the deposit of these checks, but had not charged himself, on the books of plaintiff, with the checks, the effect of the deposit of the checks to the credit of plaintiff was to cover up or reduce the shortage then existing by the amount of the checks, and that he was therefore not entitled to credit in the accounting, to the amount of the deposit. Defendant's objections were properly overruled. Both witnesses were expert accountants-one a certified accountant, and the other a bank officer of long experience. It was competent for them to testify as to the effect upon the accounting of these entries. State v. Hightower, 187 N.C. 300, 121 S.E. 616. Assignments of error based upon these exceptions cannot be...