Jaeger Mfg. Co. v. Maryland Casualty Co.
| Decision Date | 18 November 1941 |
| Docket Number | 45080. |
| Citation | 300 N.W. 680,231 Iowa 151 |
| Parties | JAEGER MFG. CO. v. MARYLAND CASUALTY CO. |
| Court | Iowa Supreme Court |
Appeal from District Court, Polk County; Russell Jordan, Judge.
Action at law to recover on surety bond. Judgment for plaintiff, and defendant appeals.
Affirmed.
Miller, Huebner & Miller, of Des Moines, for appellant.
Carl A Burkman, Stipp, Perry, Bannister & Starzinger, and Donald D Holdoegel, all of Des Moines, for appellee.
Irving A. Potwin was a certified public accountant, licensed and authorized to engage in the public practice, and did so engage in that practice from the time of the passage of the law relating to public accountants up to the time of his death on August 16, 1938.
The plaintiff is a corporation, all the stock of which is held by members of the same family except as to one stockholder. W. C. Jaeger and his three sons, C. S. Jaeger, A. C. Jaeger, and W. J. Jaeger, are the members of the family holding the stock. W. J. Jaeger has been secretary of the corporation since 1913, and as such has at all times had charge of the books and records. In May 1917, Potwin was employed, the nature of his employment being one of the principal points in dispute, the defendant claiming that his duties were those of a bookkeeper, while the plaintiff insists that his employment was that of a certified public accountant. He received his first certificate as a certified public accountant on November 14, 1930, and continued to pay the annual fee in December of each year until and including the December prior to this death. His official bond was filed each year as required by law. The bond for the year 1932 was filed prior to December 9, 1931, with Potwin as principal and the Maryland Casualty Company, defendant herein, as surety. After Potwin's death, on August 23, 1938, Lloyd Fugill, a public accountant, was employed by the plaintiff to make an audit of the records of the company, and examined and used the payroll books, check registers, monthly bank statements, and cancelled checks. From this report and other evidence it was found that the plaintiff company had been systematically cheated, and that of their funds a large amount had been taken through the operations of Potwin.
It was conceded in argument and there is no dispute that during the years in question a large amount of plaintiff's money was taken by Potwin by means of padding the payroll register and the forgery of certain checks. The district court in its judgment found this amount to be the sum of $3,309, which, with interest from the various dates upon which the amounts were taken, aggregated the sum of $4,533.53, the amount of the judgment. There is no serious controversy as to the amount of money taken.
The bond, after the usual recitals, provides as conditions: " * * * that as Certified Public Accountant in State of Iowa, he will render a true account of his office and of his doings therein to the proper authority, when required thereby, or by law; that he will promptly pay over to the officer or person entitled thereto all moneys which may come into his hands by virtue of his office; that he will promptly account for all balances of money remaining in his hands at the terminaton of his office; that he will exercise all reasonable diligence and care in the preservation and legal disposal of all money, books, papers, securities, or other property appertaining to said office, and deliver them to his successor or to any other person authorized to receive the same; and that he will faithfully and impartially, without fear, favor, fraud or oppression, discharge all the duties now or hereafter required of his office by law, and the securities on such bond shall be liable for all money or public property that may come into the hands of such officer at any time during his possession of such office, * * *."
The trial was begun on the 6th day of April, 1939, before a jury, and proceeded until April 12, at which time, by stipulation of the parties, the jury was waived and it was agreed that all questions of fact as well as of law should be submitted to and determined by the court without a jury. The trial continued until April 24, when the cause was finally submitted. A great deal of the evidence submitted bore on the question of the peculation of Potwin and may be eliminated from the consideration of this case except as it may be necessary to refer to it in relation to the parties' differing theories as to the nature of the employment of Potwin.
The nature of the defense, as indicated by the motion of the defendant for judgment, consists of four principal grounds-the bar of the statute of limitations; that the duties of Potwin in his relation to the plaintiff were merely those of a bookkeeper and were not the statutory duties of the office of certified public accountant; and, basing the defense largely on such claimed fact that Potwin performed merely the duties of a bookkeeper and not the statutory duties of the office of certified public accountant, that since the provisions of the statute are written into the terms of the bond and such statute specifically exempts the acts and omissions of persons employed for the purpose of keeping books, making trial balances, or performing general commercial bookkeeping, the defendant would not be liable on the bond, and that to so hold the defendant liable for the acts or omissions of Potwin would require the writing of an entirely new and different bond by judicial construction, which would be different than the bond required by the statute and in violation of the constitution. Defendant claims, as shown by such motion, that the proximate cause of the loss to the plaintiff was the failure on the part of the plaintiff to supervise the private clerical functions of Potwin, and was not the failure of Potwin to perform the public duties of the office of certified public accountant, and that by reason thereof the defendant is not liable; and it is further claimed that the forgeries are not chargeable to the surety.
As indicated, the facts are not seriously in dispute, either in this action or in the two companion cases. The statute defining certified public accountants is found in chapter 91-Cl, section 1905-c6, Codes 1931, 1935 (), as follows: " All persons engaged in the practice of accountancy, within the meaning and intent of this chapter, who, holding themselves out to the public as qualified practitioners, and maintaining an office for this purpose, either in their own names, or as office managers and/or as managing officers of assumed name, association or corporate organization, perform for compensation, on behalf of more than one client, a service which requires the audit or verification of financial transactions and accounting records; the preparation, verification and certification of financial, accounting, and related statements for publication or for credit purposes; and/or who in general and incidental to such work, render professional assistance in any and all matters of principal and detail concerning accounting procedure and the recording, presentation and certification of financial facts."
Section 1905-c21 of the same chapter (section 1905.19, Code 1939) contains the following exception: " Nothing contained in this chapter shall be construed to prevent: * * * The employment of persons by more than one individual firm or corporation for the purpose of keeping books, making trial balances, or performing general commercial bookkeeping."
Further provisions of the chapter (section 1905-c13, Codes 1931, 1935, section 1905.11, Code 1939) require each person granted a certificate to practice accountancy to give a bond in the sum of $5,000, to the auditor of state, before entering upon the discharge of his duties, for the faithful performance of the same; and to pay an annual fee of $10.
The question is: What is a certified public accountant licensed and bonded to do? One thing is to hold himself out as a certified public accountant. Wangerin v. Wisconsin State Board of Accountancy, 223 Wis. 179, 270 N.W. 57. The provisions of our statute are as given above. Section 1905-c21, Codes 1931, 1935 (section 1905.19, Code 1939) excepts attorneys and public bookkeepers. It is undisputed that Potwin held himself out, maintained an...
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