Gotcher Engineering & Mfg. Co. v. U.S. Fidelity & Guaranty Co., 44178

• Decision Date: 19 December 1966
• Docket Number: No. 44178,44178
• Citation: 193 So.2d 115
• Parties: GOTCHER ENGINEERING & MANUFACTURING COMPANY, Inc. v. UNITED STATES FIDELITY & GUARANTY COMPANY.
• Court: Mississippi Supreme Court

Page 115

193 So.2d 115

GOTCHER ENGINEERING & MANUFACTURING COMPANY, Inc. v. UNITED STATES FIDELITY & GUARANTY COMPANY.

No. 44178.

Supreme Court of Mississippi.

Dec. 19, 1966.

Sullivan, Dunbar & Smith, Clarksdale, for appellant.

Brewer, Brewer & Luckett, James E. Upshaw, Clarksdale, for appellee.

JONES, Justice.

Appellant sued appellee in the Circuit Court of Coahoma County, Mississippi, and from a judgment of that court sustaining a demurrer to the declaration, and, upon appellant refusing to plead further, dismissing the case, it comes here. We affirm.

Appellant manufactured and sold agricultural machinery, equipment, and supplies. In the furtherance of its business it maintained a warehouse in the City of Plainview, Texas for the storing of its products. At the time complained of there was in force an insurance policy issued by appellee and termed, 'Comprehensive Dishonesty, Disappearance and Destruction Policy,' under the terms of which each employee was covered to the extent of $10,000.

The declaration alleged that at the Texas warehouse mentioned there were two employees, Dale and Bill Price, brothers, who were the only employees of plaintiff (except the president of the company) having access to the warehouse and its contents. That, when said brothers were employed, a physical inventory showed the warehouse contained products of the aggregate value of $26,923.79. That from the date of the employment (February 20, 1962) until August 31, 1963, plaintiff shipped its products It was charged that the Price brothers had exclusive authority and control over said warehouse.

to the warehouse in the amount of $29,999.69; re-shipped from the warehouse $42,461.22 in merchandise; and, there should have been left in said warehouse an inventory aggregating $14,462.26 in value. That on September 5, 1963, an inventory was taken which revealed only $791.13 in aggregate value accounted for, resulting in a shortage of $13,671.15.

It was also alleged, after discovering said shortage, that an investigation revealed said employees, prior to August 31, 1963, sold one of the missing items, accepting the purchaser's check for $1,010 and appropriating same to their own use. It was then charged these circumstances create a probable and reasonable conclusion that the remaining shortgage was also fraudulently and dishonestly appropriated by said employees. It charged also that the liability for the item sold by said employees had been admitted by the defendant.

Attached to the declaration was what is marked as Exhibit B, 'Items Missing from Plainview, Texas Warehouse.' This exhibit consisted of six pages in which various items were listed, with the quantity of each item and the value. There were items of value ranging from ten cents, or less, to $2,000 on one or two. The quantity of each item was given, and it ran from one to 900.

The insuring clause of the policy, which was attached to the declaration as an exhibit, provided, in part, as follows:

'The Company, in consideration of the payment of the premium, and subject to the Declarations made a part hereof, the General Agreements, Conditions and Limitations and other terms of this Policy, agrees with the Insured, in accordance with such of the Insuring Agreements hereof as are specifically designated by the insertion of an amount of insurance in the Table of Limits of Liability, to pay the Insured for:

INSURANCE AGREEMENTS

Employee Dishonesty Coverage-Form B Loss of Money, Securities and other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others, the amount of insurance on each of such Employees being the amount stated in the Table of Limits of Liability applicable to this Insuring Agreement.'

Another provision of the policy under the head, 'Exclusions,' reads:

'Section 2. This Policy does not apply:

(a) to loss due to any fraudulent, dishonest, or criminal act by any Insured or a partner therein, whether acting alone or in collusion with others;

(b) under Insuring Agreement 1 to loss, or to that part of any loss, as the case may be the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of Money, Securities or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees;'

The question involved is whether the declaration brought the case without the provisions of Section 2(b). It will be noted the declaration charges directly that the employees misappropriated only one item. The other items are charged or alleged to be missing because they were undisclosed by an inventory. The loss is only shown by the difference in inventory. The only way in which the employees are sought to be charged with fraud and dishonesty is by alleging that they were the only employees (except the president) who had access to said warehouse, and that their control thereof was exclusive.

In Fort Smith Tobacco & Candy Co. v. American Guaranty & Ins. Co., 208 F.Supp. 244 (W.D.Ark.1962), there was involved an insurance policy of the same type and with exactly the same insuring clause and the same exclusionary clause. The loss there involved cigarettes, drugs and sundries, appliances, miscellaneous items, Camp Chaffee account, and cash collections. The total claim was over...