The Mitchell Grain & Supply Company v. The Maryland Casualty Company

• Decision Date: 12 February 1921
• Docket Number: 22,986
• Court: Kansas Supreme Court
• Parties: THE MITCHELL GRAIN & SUPPLY COMPANY, Appellee, v. THE MARYLAND CASUALTY COMPANY, Appellant

195 P. 978

108 Kan. 379

THE MITCHELL GRAIN & SUPPLY COMPANY, Appellee, v. THE MARYLAND CASUALTY COMPANY, Appellant

No. 22,986

Supreme Court of Kansas

February 12, 1921

Decided January, 1921.

Appeal from Rice district court; DANIEL A. BANTA, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. DEFAULTING EMPLOYEE--Report of Accountant as to Shortage. The evidence as a whole is held not to show that the report of an accountant as to a shortage of an employee was arrived at upon an improper basis.

2. INDEMNITY BOND--Shortage of Employee--Interpretation of Word "Embezzlement" as Used in Bond. In a bond insuring an employer against losses sustained by reason of conduct of an employee constituting embezzlement the word "embezzlement" is to be construed broadly in its general and popular sense, rather than in a narrow and technical spirit with specific reference to the local statute; and a loss occasioned by the employee's speculating on the market in the name of the employer, but without his knowledge or consent, is within the protection of the bond.

3. SAME--Employer's Warranty that Books Shall Be Inspected Every Three Months. Where a contract of insurance against losses through the embezzlement of an employee contains a warranty on the part of the employer that the books shall be inspected, audited and verified at least once in three months, this requirement is met by an examination conducted by the officers of the employing company, and does not involve the employment of an expert accountant for the purpose; nor does the fact that the examinations that were made failed to disclose shortages that were afterwards found to have existed necessarily show any breach of the warranty.

4. SAME--Requirement that Employee's Shortage Must Be Discovered Within Six Months After Discharge. The requirement of a bond of indemnity against the results of embezzlement by an employee that losses to be covered by it must be discovered within six months after his discharge is met where within that period the fact of a shortage becomes known although its exact amount is not ascertained until later.

C. M. Williams, and D. C. Martindell, both of Hutchinson, for the appellant.

Samuel Jones, and Ben Jones, both of Lyons, for the appellee.

OPINION

MASON, J.:

The Mitchell Grain & Supply Company, a corporation dealing in grain, live stock and coal, employed F. H. Biesemeyer as its manager, the Maryland Casualty Company executing a bond for him. He served in that capacity for about four years. His employer brought an action against the surety company alleging that he was short in his accounts. The plaintiff recovered judgment and the defendant appeals.

1. The trial was had without a jury. The court found a shortage evidenced by the difference between the cash shown by the books kept by the manager to have been received by him and that accounted for therein. In the finding the amount was stated to be $ 1,758.38. The evidence showed it to be $ 1,788.16, but the difference in the figures is not material to the present inquiry. The defendant argues that the finding is without support. The argument, however, is based upon the assumption that the amount was arrived at by taking the difference between the total cash received and the total amount of cash deposited in the bank. The accountant upon whose investigation and report the plaintiff relied made statements in his cross-examination which taken by themselves tended to support that theory. But his testimony as a whole made it reasonably clear that what he deducted from the cash receipts was not the bank deposits alone, but a sum which included all the cash shown by the books to have been paid out in any way. The situation in this regard is shown by this extract from the cross-examination:

"Q. You go to work to see how much money he has deposited in the bank on the theory that all the cash which he has received has been deposited in the bank? A. No, on the theory that it has been deposited in the bank less what he has paid out.

"Q. Now, you took the deposits in the bank and what he has paid and what does that show? A. $ 40,305.63.

"Q. And you deduct $ 40,305.63, being the amount that he has deposited in the bank as shown by his deposit slips and pass book, from $ 42,093.79, and you conclude that the difference is a shortage which he has appropriated. Is that your proposition? A. Yes, sir; that is my proposition.

"Q. Now, you say that his cash book shows items of cash that was not deposited? Did I understand you to say that? A. No, I don't believe I did.

"Q. Well, does it? A. His cash book shows items in this way that are not deposited; that he has received $ 1,788.16 more than he has deposited.

"Q. But how do you know that all the cash that he has received has been deposited in the bank? A. It has not been all deposited.

"Q. Suppose a man comes in with a small parcel of wheat or oats and he pays for it out of the drawer from cash received. That never goes into the bank? A. He has no record of paying it out.

"Q. Have you a record of what has been paid out? A. We have made a schedule showing the actual cash that has been paid, according to his cash book."

In the redirect examination the witness said:

"This record of investigation shows the cash that he paid out that never went into the bank. If a man came along and sold something for cash, and he paid him cash out of the drawer, he has made a record of that. We have the cash book pages and the amounts that he has taken credit for, and I have given him credit for that in the deduction amount."

2. The other item of shortage upon which the judgment was based is a loss of $ 1,600 made by the manager in a speculation on the pork market conducted in the name of the grain company, the transaction, however, not being shown upon its books. The bond executed by the defendant undertook to reimburse the plaintiff "for such loss of money, securities and the personal property belonging to or in the possession of the employer . . . which the employer shall have sustained by reason of any act or acts constituting larceny or embezzlement, committed by the employee." The defendant contends that the act of the employee in investing the plaintiff's money in a losing venture on the market did not constitute embezzlement. This court has already held that a bond indemnifying an employer against loss due to the "fraud or dishonesty" of an employee "amounting to embezzlement" is to be construed as covering acts of the general character indicated, and that in an action thereon it is not necessary to a recovery to prove embezzlement with technical accuracy. (Bank v. Colton, 102 Kan. 365, 170 P. 992; Milling Co. v. Surety Co., 104 Kan. 790, 180 P. 782.) It is true that in the bond now under consideration the words "fraud and dishonesty" do not appear and the phrase "constituting embezzlement" is used instead of "amounting to embezzlement," so that its language is not...