Hartford Acc. & Indem. Co. v. All Am. Nut Co.

• Decision Date: 20 September 1963
• Citation: 220 Cal.App.2d 545,34 Cal.Rptr. 23
• Court: California Court of Appeals Court of Appeals
• Parties: HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation, Plaintiff and Appellant, v. ALL AMERICAN NUT COMPANY, Inc., a corporation, Bank of America National Trust and Savings Association, a national banking association, Defendants and Respondents. * Civ. 26945.

Page 23

34 Cal.Rptr. 23

220 Cal.App.2d 545

HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation, Plaintiff and Appellant, v. ALL AMERICAN NUT COMPANY, Inc., a corporation, Bank of America National Trust and Savings Association, a national banking association, Defendants and Respondents. ^*

Civ. 26945.

District Court of Appeal, Second District, Division 2, California.

Sept. 20, 1963.

Rehearing Denied Oct. 14, 1963.

Hearing Denied Nov. 13, 1963.

Belcher, Henzie & Fargo, William I. Chertok, Los Angeles, for appellant.

Samuel B. Stewart, Robert H. Fabian, Geo. L. Beckwith, Los Angeles, for respondent Bank of America Nat. Trust and Savings Assn.

No appearance for respondent All American Nut Co., Inc.

ASHBURN, Justice.

Action for declaratory relief in which plaintiff appeals from an adverse judgment.

Plaintiff's counsel made an opening statement at the trial pursuant to a stipulation 'that said opening statement would be considered by the Court in the nature of an offer of proof upon which the Court could determine on the basis of the offer of proof whether he would direct a verdict against the plaintiff, declaring the rights and duties of the parties as a matter of law.' Defendant Bank of America National Trust and Savings Association made a motion for judgment on the opening statement and same was granted. Thereupon the judgment was entered which forms the basis of this appeal.

The rules governing an appeal from such a judgment are set forth in Bias v. Reed, 169 Cal. 33, at pages 37-38, 145 p. 516, at page 517-518 wherein it is said: "It is no doubt true, as is argued by the appellants, that the practice of directing a verdict, in advance of the introduction of evidence, upon the opening statement of one or the other party is a dangerous one, and that an order granting such motion can be upheld only where it is clear that counsel has undertaken to state all of the facts which he expects to prove, and it is plainly evident that the facts thus to be proved will not constitute a cause of action or a defense, as the case may be. * * * In reviewing an order directing a verdict on an opening statement, the appellate court must apply rules analogous to those which govern it in reviewing an order granting a nonsuit after the introduction of evidence. Every fact which counsel has stated as among the matters to be proved, together with all favorable inferences reasonably to be drawn therefrom, must be accepted by the court as facts which would have been proved if the case had been allowed to be tried." (Emphasis added.) To the same effect are: Sayadoff v. Warda, 125 Cal.App.2d 626, 627, 271 P.2d 140; Paul v. Layne & Bowler Corp., 9 Cal.2d 561, 564, 71 P.2d 817; Moffitt v. Ford Motor Co., 117 Cal.App. 247, 251, 3 P.2d 605; Cortopassi v. California-Western, etc., Co., 39 Cal.App.2d 280, 283, 102 P.2d 1093; Kaukonen v. Aro, 142 Cal.App.2d 502, 505-506, 298 P.2d 611.

The opening statement set forth the following facts. On September 18, 1959, plaintiff Hartford Accident & Indemnity Company issued to All American Nut Company, Inc. in consideration of a premium paid to it a fidelity bond with a liability limit of $2,500. The clerk's transcript shows that the 'Insuring Agreement' reads as follows: 'The Underwriter, 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 Bond, agrees to indemnify the Insured against any loss of money or 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 indemnity on each of such Employees being the amount stated in Item 3 of the Declarations.' Reverting to the opening statement, it appears that Bonnie Porter was a general office clerk of All American and any loss occasioned by her fraudulent or dishonest act was covered by the fidelity bond. 'That said Bonnie Porter did steal a certain check from All American and did turn same, together with samples of her employer's genuine signature over to one Dan Aitken, who subsequently completed the check, making it payable to J. B. Cox Company, and forged the name of the official of All American as drawer; That on or about August 15, 1960, said check was deposited in an account opened at the Tweedy-Alexander Branch of the Bank of America National Trust and Savings Association [in the City of South Gate] in the name of J. B. Cox Company; the check was drawn upon All American's account at the First and Chicago Branch of the Bank of America; subsequently the funds, except for $785.35, were withdrawn from the account of J. B. Cox Company; That the amount of the forged check was $14,785.35, and that such amount was charged against the commercial account of All American at the First and Chicago Branch of the Bank of America; That such loss to All American was sustained through a fraudulent and dishonest act of one of its employees; that is, Bonnie Porter; That the check did not constitute a valid order of All American giving Bank of America a right as against All American to charge the amount thereof to its account; That the Bank of America retains and claims as salvage the sum of $785.35, not withdrawn from the J. B. Cox Company account; That upon All American's demand made September 16, 1960, for $14,785.35, the Bank of America has credited to the account of All American the sum of $12,285.35, and that such total credit is $2,500 less than the amount charged against the account of All American when the forged check was presented; That the Bank of America has refused and does refuse to credit an additional $2,500 to All American's account; That on or about September 30, 1960, All American presented Hartford its claim in writing for $2,500, the penal limit of the bond, and that Hartford has refused to pay same and brought this action seeking to determine its rights, if any, as against the bank and All American; * * * The evidence will further show that Hartford made a demand upon the All American Nut Company, pursuant to Civil Code Section 2845, to proceed against the Bank of America for the $2,500, but that the All American Nut Company has refused to do so and informed Hartford prior to the commencement of this action that the All American Nut Company would proceed against Hartford for the $2,500. The evidence, we submit, will further show that the Bank of America was negligent in accepting for deposit and subsequently clearing the forged check for the following reasons: First, in failing to obtain any identification from Billy Dan Aitken when he deposited the forged check representing himself to be J. B. Cox, and this despite the fact that the custom and practice of the banking industry in August of 1960 in the County of Los Angeles and City of South Gate was to demand and receive identification from a depositor opening a new account and not to open an account without identification, and this further despite the fact that the Bank of America in August of 1960 instructed its employees to obtain identification from a depositor opening a new account and not to open such an account without identification; Second, in failing to telephone the maker of the check and verify the check when no identification was obtained from Billy Dan Aitken, and this despite the fact that in August of 1960 the custom and practice in the banking industry in the County of Los Angeles and City of South Gate was to make such a telephone call, and further despite the fact that the Bank of America in August of 1960 instructed its employees to make such a call where no identification was obtained from a depositor opening a new account.'

The court's ruling was as follows: 'The Court finds that it is the right of the All American Nut Company to elect to pursue the plaintiff under the obligation of the bond that has been referred to in the opening statement, and the Court finds that it is the duty of the plaintiff, the Hartford Accident and Indemnity Company, to pay to the All American Nut Company the face amount of the bond in the sum of $2,500 with interest and costs incurred by the defendant All American Nut Company from September 30, 1960, to date, and to pay to the Bank of America costs incurred by said defendant. * * * On the question of negligence, that if even all the affirmative matters as set forth in the plaintiff's opening statement with respect to items of claimed negligence on the part of the bank were established, the Court finds that in this action such items, which may be for the protection of the bank or for its customers, do not constitute such negligence that they would affect the equities as between the Hartford Accident and Indemnity Company and the bank.'

Essentially this case presents a question of subrogation and it was so treated below. Although the insurer who issues a fidelity bond is not a surety for the employer and the principal, if any, is the unnamed and prospective criminal employee (cf. 44 C.J.S. Insurance §§ 13, 16, pp. 477, 479), the courts by analogy have held the principles of subrogation to be applicable to a fidelity bond situation and the insurer may have subrogation against a third party provided its equities are superior to those of the third party. This applies to banks as well as other third parties.

The applicable rules are summarized in 46 C.J.S. Insurance § 1209, page 162: 'Subrogation against bank generally. On payment by insurer of insured's loss resulting from an employee's forgery of checks insurer immediately becomes vested with all the rights of the employer against the drawee bank, subject to the priority of equities as between insurer and the bank. It has been held that, where an employer has recovered on a fidelity bond by reason of his employee appropriating his money deposited in a bank by raising or forging checks, insurer is not entitled to subrogation to any...