State ex rel. Dept. of Unemployment Compensation v. Continental Cas. Co.
| Decision Date | 06 May 1947 |
| Docket Number | 9848. |
| Parties | STATE ex rel. DEPARTMENT OF UNEMPLOYMENT COMPENSATION v. CONTINENTAL CASUALTY CO. |
| Court | West Virginia Supreme Court |
Syllabus by the Court.
1. Payments to the unemployment compensation fund required by the Unemployment Compensation Law of this State from an employer subject to its provisions are excise taxes.
2. The provisions of Section 1, Article 2, Chapter 12, Code of West Virginia, 1931, authorize the payment by an employer subject to the Unemployment Compensation Law of this State of contributions required of him to the unemployment compensation fund by means of a check which is payable and forwarded in the manner specified in such section when the amount of such check does not exceed the sum of twenty-five thousand dollars.
3. Payment of excise taxes imposed by the Unemployment Compensation Law of this State occurs when a check used for that purpose in compliance with Section 1, Article 2, Chapter 12, Code of West Virginia, 1931, is received by an employee of the Department of Unemployment Compensation who obtains it by virtue of his employment if such check is in fact paid in due course.
4. A surety upon an indemnifying bond, conditioned to pay any loss of money or property sustained by the obligee by reason of any dishonest or criminal act or omission of an employee of the obligee in any position or at any location while in its employ and for the faithful discharge by such employee of the duties of his employment and to account for and pay over as required by law, all moneys which come into his possession by virtue of his employment, is liable to the obligee in the amount of the coverage provided by the bond, when the undisputed evidence in the nature of a stipulation of facts shows that checks, in an aggregate amount in excess of the coverage of the bond, used in the manner provided and authorized by Section 1, Article 2, Chapter 12 Code of West Virginia, 1931, for the purpose of paying excise taxes due the obligee, were by virtue of his employment received by such employee and their proceeds obtained and appropriated by him to his own use and that such checks were in fact paid by the drawee from funds of the drawers of such checks.
Ira J. Partlow, Atty. Gen., and Leo Loeb, of Charleston, for plaintiff in error.
Steptoe & Johnson, Stanley C. Morris and Wilson Anderson, all of Charleston, for defendant in error.
In this action of covenant, instituted by the State of West Virginia for the use and benefit of the Department of Unemployment Compensation by its director, as plaintiff, against Continental Casualty Company, as defendant, in the Circuit Court of Kanawha County, West Virginia, and in which the plaintiff seeks recovery upon an indemnifying bond, executed by the defendant, as surety, the Circuit Court entered a judgment in favor of the defendant. To that judgment the plaintiff obtained a writ of error to this Court. The questions presented involve the liability of the defendant on the bond.
The case was submitted to the trial court in lieu of a jury, by a stipulation of facts, upon the declaration of the plaintiff, the pleas of the defendant denying liability on the bond, and the general replication of the plaintiff. On December 20, 1945, the court, after overruling the motion of the plaintiff to set aside its finding against the plaintiff, entered the judgment in favor of the defendant of which the plaintiff complains in this Court.
The condition of the bond executed by the defendant, dated June 15, 1941, and which was in effect when the losses alleged to have been sustained by the plaintiff occurred, in substance, is to pay State of West Virginia, Department of Unemployment Compensation, as employer, for loss of money or property, including that for which the employer is legally responsible, sustained through fraud, dishonesty, forgery, larceny, theft, embezzlement, wrongful abstraction, misapplication, misappropriation, or any other dishonest or criminal act or omission, directly or through connivance with others, on the part of any of the employees named in the schedule attached to, and made a part of, the bond while in any position or at any location in the employ of the employer. The schedule referred to included Charles Summers, an employee of the department occupying the position of junior accountant, for any default by him to the limit of $2,000, the amount sought to be recovered by the plaintiff, and was effective, as a part of the bond, from and after June 15, 1941. By an attached rider, effective June 15, 1941, the bond was amended to include the requirements of Section 3, Article 2, Chapter 6, Code of West Virginia, 1931, which declares that, unless otherwise provided, every bond required by any statute of this State of any person undertaking an office or employment shall be conditioned upon the faithful discharge by the principal of the duties of his office or employment, and upon accounting for and paying over, as required by law, all moneys which may come into his possession by virtue of the office or employment, and that the liability of the principal and his sureties upon such bond shall extend to all moneys received by the principal by virtue of his office or employment under the laws in effect at the time of the execution of the bond, and to all moneys which shall come into his possession by virtue of his office or employment under the provisions of any law enacted during his continuance in such office or employment. The bond, as amended, was approved by the Governor and the Attorney General of this State and was duly filed in the office of the Secretary of State.
On June 28, 1941, Utilities Coal Company, an employer subject to the Unemployment Compensation Law of this State, following a custom which obtained in the Department of Unemployment Compensation between the department and responsible employers, sent its check, payable to the department, for $900.65, and on October 31, 1941, a second check, also payable to the department, for $983.77. Those checks were sent for the purpose of paying its contribution liabilities to the unemployment compensation fund, required by the Unemployment Compensation Law, for the months of May and September, 1941, respectively. The director is the custodian of this fund and is required to administer it in the manner provided by the statute, Section 2, Article 8, Chapter 1, Acts of the Legislature of 1936, Second Extraordinary Session. On June 28, 1941, another such employer, Buffalo-Winifrede Coal Company, sent its check, payable to the department, for $408.25, for the purpose of paying its contribution liability, under the Unemployment Compensation Law, for the month of May, 1941. Each of the three checks was drawn upon the same bank and was mailed to the department on the date it was issued. In January, 1942, the department notified each employer that it was delinquent in the payment of its contribution for the periods which the checks were intended to cover.
An investigation followed. It resulted in the discovery that Summers had obtained the checks, caused the payee in each to be altered, and received the proceeds of each check, by indorsing the name of each substituted payee. Notice of this fraud was given promptly to the bank upon which the checks were drawn, and thereafter Summers was convicted and sentenced to imprisonment in the state penitentiary upon an indictment for forgery. He did not account to the department for any of the sums of money aggregating $2,292.67 which came into his possession from his fraudulent and unlawful use of the checks. The proceeds of the checks have not been recovered from him. By reason of the misappropriation by Summers of the moneys obtained by him upon the altered checks the employers were not given credit by the department upon their liabilities to it in the amounts represented by the checks.
Upon discovery of the foregoing facts, the plaintiff gave due notice to the defendant and filed with it written proof of the alleged loss. The defendant denied liability on the bond, and this action was instituted within the time limit specified in the bond.
Authenticated copies of the bond, the schedule, and the riders, and photostatic copies of the checks, are in evidence as part of the stipulation of facts.
The plaintiff assigns as error the action of the trial court: (1) In finding against the plaintiff and in favor of the defendant; (2) in overruling the motion of the plaintiff to set aside the finding against it as contrary to the law and the evidence and to award the plaintiff a new trial; (3) in failing to find that the plaintiff was entitled to recover from the defendant the sum of $2,000; and (4) in finding for the defendant.
Numerous grounds are urged in support of these assignments of error. They may all be summarized and grouped under these heads: (a) Contributions to the unemployment compensation fund are payable by check; (b) the alterations and the forgeries by Summers of the checks and his misappropriation of their proceeds constitute a breach of the conditions of the bond which renders the defendant liable as his surety to the full extent of its coverage; (c) Summers, the defaulting employee whose fraudulent acts occurred while the bond was in force, was included in its coverage within the limit of $2,000; (d) the express purpose of the bond is to assure the payment, to the State, of all moneys, securities and other property of the State, received by him, as such employee by virtue of his employment; (e) the terms of the bond, within specified limits, provide against loss of money or property sustained by the department because of the dishonest or criminal acts of its employee, Summers, while in any...
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