Savannah Wholesale Co. v. Continental Casualty Co.

• Decision Date: 30 August 1960
• Docket Number: No. 18180.,18180.
• Citation: 279 F.2d 706
• Parties: SAVANNAH WHOLESALE COMPANY, Appellant, v. CONTINENTAL CASUALTY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

279 F.2d 706 (1960)

SAVANNAH WHOLESALE COMPANY, Appellant, v. CONTINENTAL CASUALTY COMPANY, Appellee.

No. 18180.

United States Court of Appeals Fifth Circuit.

June 15, 1960.

Rehearing Denied August 30, 1960.

Emanuel Lewis, Lewis, Wylly & Javetz, Savannah, Ga., for appellant.

Kirk M. McAlpin, Bouhan, Lawrence, Williams, Levy & McAlpin, Savannah, Ga., for appellee.

Before RIVES, Chief Judge, and JONES and WISDOM, Circuit Judges.

RIVES, Chief Judge.

This is an appeal from a judgment entered upon defendant's motion for a directed verdict at the close of plaintiff's case. The appellant is a wholesale dry goods concern; the appellee an insurance company. The action was brought upon a contract of insurance between the parties, under the terms of which appellant's business was protected against any loss resulting from dishonesty on the part of its employees. The pertinent provisions of that contract are set forth in the margin.¹

The motion for a directed verdict was predicated upon two grounds: first, that the appellant had failed to show that it had, in fact, sustained a loss; and, secondly, that, assuming that a loss had been sustained, the appellant had failed to show that such loss was attributable to employee dishonesty. Although separate and alternative in theory, these two grounds tend to merge under the circumstances of this case. We will therefore discuss the evidence adduced on both of these points together. Our task is to determine whether that evidence was sufficient to entitle the appellant to submission of its case to the jury.

The appellant's contention is that, during the first nine months of 1956, it suffered losses in excess of $10,000² as a result of dishonesty on the part of some one or more of its employees. The primary evidence upon which this contention is based is that the gross profit percentage for that period was significantly lower than it should have been in view of the markup it was placing upon its merchandise. The appellant's business records, including physical inventory counts taken at the beginning and the end of the period in question indicated a gross profit of approximately 12%. The appellant's witnesses, on the other hand, testified that it had been the policy of the business at that time to place a 20% markup on all of its merchandise. In addition, there was testimony that the business had realized gross profits of 16-18% in the period immediately preceding the nine months in question and in the period immediately following the discovery of the shortage in profits.

When this sharp decrease was brought to appellant's attention by its accountant, a thorough investigation was made in an attempt to determine the cause for such a serious business reversal. This investigation included a study of selling practices, billing methods, the bookkeeping system, and other similar aspects of appellant's operations. The result of this investigation was that each of these possibilities was, at least to the satisfaction of appellant's managers, ruled out as the cause of the discrepancy.

During the course of this investigation, appellant's managers discovered that a roof hatch of its building was open. This hatch, which had previously been latched from the inside, led from the storeroom where appellant's merchandise was kept through a small attic and then out onto the roof of appellant's building. It is uncontroverted in the evidence that appellant's building was so situated that merchandise could have been easily removed through this hatch.³

The discovery of the open hatch prompted appellant's managers to call in the local police, who thereupon conducted an investigation. As a result of this investigation, two small boxes⁴ were discovered in the attic near the open hatch. In addition, the police made an examination of the premises on the basis of which they concluded that the hatch had not been opened from the outside. Finally, they investigated certain of appellant's employees, but with no success. The police then closed their investigation and, as far as they are concerned the mystery remains unsolved.

The appellant's position is that, on the basis of the foregoing evidence, the jury could quite properly have found that its low gross profit percentage was caused by the fact that merchandise had been taken out of its building through the open roof hatch, by or with the aid of, one or more of its employees. The appellee, on the other hand, contends that such a conclusion would be improper in that it could rest only upon conjecture. Upon examination of these opposing contentions, we think the appellant must prevail.

It is well settled that the policy here in question requires only that the insured prove his claim by a preponderance of the evidence.⁵ Indeed, the appellee makes no attempt to controvert this settled principle of law, but contends rather...