Thomas & Howard Co. of Shelby v. American Mut. Liability Ins. Co.

• Decision Date: 10 November 1954
• Docket Number: No. 314,314
• Citation: 241 N.C. 109,84 S.E.2d 337
• Court: North Carolina Supreme Court
• Parties: THOMAS & HOWARD COMPANY OF SHELBY, Inc. v. AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, a Corporation, M. B. Tate, Johnnie Ponders, William Huddieston, Charles Varner and James Byrd.

Page 337

84 S.E.2d 337

241 N.C. 109

THOMAS & HOWARD COMPANY OF SHELBY, Inc. v. AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, a Corporation M. B. Tate, Johnnie Ponders, William Huddieston Charles Varner and James Byrd.

No. 314

Supreme Court of North Carolina.

Nov. 10, 1954

Falls & Falls, Shelby, for plaintiff, appellant.

Helms & Mulliss, Wm. H. Bobbitt, Jr., Charlotte, and D. Z. Newton, Shelby, for defendant, appellee.

PARKER, Justice.

The facts alleged in the complaint to which the demurrer was directed are substantially these--the numbered paragraphs are ours and not those of the complaint:

One. The plaintiff is a North Carolina corporation engaged in the wholesale grocery business at Shelby. American Mutual Liability Insurance Company of Boston, Mass., is an insurance company, and does business in North Carolina. The defendants M. B. Tate, Johnnie Ponders, William Huddleston, Charles Varner and James Byrd were at the times alleged in the complaint employees of the plaintiff in its wholesale grocery business.

Two. About 20 May 1949 plaintiff purchased from American Mutual Liability Insurance Company a Comprehensive Crime Policy No. FX 70607-R insuring and indemnifying plaintiff against loss by dishonesty and/or fraud of its employees, whether acting alone or in collusion with others, of money, securities, and other property, including that part of any inventory shortage which insured shall conclusively prove to have been caused by dishonesty and/or fraud on the part of its employees to an amount not in excess of $50,000. Plaintiff paid the premiums on the policy, and it was in full force and effect during the times alleged in the complaint.

Three. While this Comprehensive Crime Policy was in full force and effect, between 20 May 1949 and 20 May 1952, plaintiff sustained property and/or inventory loss of $38,167.09 through the dishonesty and/or fraud of its employees, to wit: M. B. Tate, Johnnie Ponders, William Huddleston, Charles Varner and James Byrd acting in collusion and/or conspiracy with each other and with others named and unnamed, known and unknown, which loss was, and is, covered by the terms of the policy.

Four. Immediately upon the discovery of its losses plaintiff gave notice to American Mutual Liability Insurance Company in accordance with the terms of its policy. Plaintiff discovered its losses by an inventory item count, which is the basis of its proof of loss. Within four months after discovery of its loss and notification thereof to American Mutual Liability Insurance Company, and in compliance with the terms of the policy, plaintiff filed with the Insurance Company a statement supporting proof of loss under date of 4 September 1952.

Five. After 4 September 1952 American Mutual Liability Insurance Company sent a special investigator to plaintiff's place of business, and to him plaintiff surrendered all its records, books, papers and proof of loss and cooperated with him in every way.

Six. Plaintiff has duly performed all the conditions precedent in its policy, and has complied with all its terms.

Seven. That the defendants, and each one of them, are indebted to plaintiff in the sum of $38,167.09, and payment has been refused though requests therefor have been frequently made.

The complaint alleges that plaintiff's policy of insurance is incorporated in and made a part of the complaint, as fully as if written therein. A copy of the policy is not in the Record of the case.

The first question presented is whether there is a misjoinder of parties and causes of action.

We have examined the original record in the case of Shuford v. Yarborough, 197 N.C. 150, 147 S.E. 824. The complaint in that case alleges: 'The defendant, Eagle Indemnity Company, for a premium or money consideration entered into a written contract with the plaintiff corporation known as its Fidelity Guarantee Policy No. F. B. F.--501, in the amount of $100,000.00, in which, among others, it insured and guaranteed the fidelity of the President and Treasurer of the corporation in the sum of $10,000.00 in the following words: 'The Eagle Indemnity Company hereby agrees with the Insured named in Statement 1, that it will make good to the Insured such pecuniary loss of money, funds or other personal property (including that for which the Insured is responsible) as the Insured shall sustain by any act or acts of fraud or dishonesty (including theft, embezzlement, wrongful abstraction or misapplication) committed during the period beginning on the date mentioned in Statement 6, and ending on the termination of this Insurance by any person (directly or through connivance with others) in the employ of the Insured while occupying and performing the duties of any one of the positions described in Statement 4 (any such person while so employed is herein called 'the employee') but not to exceed on account of the act or acts of any one employee, the amount set opposite the respective position specified in Statement 4.''

Counsel for the Eagle Indemnity Company in that case filed a demurrer to Shuford's complaint alleging, among other grounds, that 'there is a misjoinder of parties defendant for the reason that the complaint does not allege that the defendants were joint tort-feasors; nor does the complaint allege that any relationship, contractual or otherwise, existed between the parties defendant'; and the demurrer alleges as a further ground: '3. For that several causes of action have been improperly united in the complaint, for the reason that: (a) The only cause of action, if any, alleged in the complaint against the defendant, J. A. Yarborough, arises out of, and is based upon tort, and out of transactions, matters and things to which the defendant, Eagle Indemnity Company, was not in any wise or in any sense a party, in which said cause of action, if any exists, the rights of the parties thereto are governed, controlled and fixed by the laws of tort action; Whereas, it appears on the face of the complaint that the cause of action of the plaintiff, if any exists, against the defendant, Eagle Indemnity Company, arises out of and is based upon an alleged contract between the plaintiff corporation and the defendant, Eagle Indemnity Company, to which said contract the defendant, J. A. Yarborough, is not alleged to be in any wise or in any sense a party, and in which cause of action, if any exists, on said contract, the rights of the parties thereto are governed, controlled and fixed by the law or laws of contract.' In the instant case the corporate defendant makes substantially the same contentions that there is a misjoinder of parties and causes of action, and that two or more actions have been improperly united.

In the Shuford v. Yarborough case, Stacy, C. J., speaking for the Court said: 'It is not a misjoinder of parties and causes for the receiver of a corporation to sue its president and treasurer for wrongfully abstracting and misappropriating funds of the corporation, and at the same time join as party defendant his surety or the guarantor of his honesty and fidelity.'

The allegations of the present complaint are to the effect that the defendant, American Mutual Liability Insurance Company, agreed to insure and indemnify plaintiff against loss by dishonesty and fraud of its employees, whether acting alone or in collusion with others, of money, securities, and other property, including that part of any inventory shortage which the insured shall conclusively prove to have been caused by dishonesty and fraud on the part of any of its employees.

'Fidelity insurance, as the term is usually employed, is a contract whereby one, for a consideration, agrees to indemnify another against loss...