United States Fidelity & Guaranty Co. v. Des Moines Nat. Bank

• Decision Date: 16 March 1906
• Docket Number: 2,200.
• Citation: 145 F. 273
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. DES MOINES NAT. BANK OF DES MOINES, IOWA.
• Court: U.S. Court of Appeals — Eighth Circuit

145 F. 273

UNITED STATES FIDELITY & GUARANTY CO. v. DES MOINES NAT. BANK OF DES MOINES, IOWA.

No. 2,200.

United States Court of Appeals, Eighth Circuit.

March 16, 1906

J. L Parrish (R. L. Parrish and C. C. Dowell, on the brief), for plaintiff in error.

Charles L. Powell (W. L. Read, on the brief), for defendant in error.

Before VANDEVANTER and HOOK, Circuit Judges, and LOCHREN, District judge.

VANDEVANTER Circuit Judge.

The Des Moines National Bank of Des Moines, Iowa, recovered in the Circuit Court against the United States Fidelity & Guaranty Company, a Maryland corporation, a verdict and judgment in the sum of $5,000, with interest, upon a bond whereby, subject to the conditions therein contained the guaranty company agreed to make good and reimburse to the bank any pecuniary loss sustained by it through 'the personal dishonesty or culpable negligence' of Elton C Kelley, its receiving teller, in connection with the duties pertaining to that position, 'and for which the employee shall be legally liable to the employer. ' To secure a reversal of that judgment the guaranty company sued out this writ of error.

One of the conditions of the bond was this:

'The company shall not be liable hereunder for any loss occasioned by mistake, accident, error of judgment on the part of any employee, or any robbery, unless by or with the connivance or culpable negligence of the employee; and 'culpable negligence,' as used in this bond, shall be taken and held to mean failure to exercise that degree of care and caution which men of ordinary prudence and intelligence usually exercise in regard to their own affairs.'

In different portions of the court's charge to the jury the degree of care and caution, failure to exercise which constitutes culpable negligence within the meaning of the bond, was declared to be 'the very highest, you might almost say the highest possible,' 'the very highest,' and 'an extraordinary and a very high degree. ' This was excepted to at the time and is assigned as error. The exception was well taken. The terms of the contract, which were perfectly plain, did not call for the exercise by the employee of the very highest or an extraordinary degree of care and caution, but only such as men of ordinary prudence and intelligence usually exercise in regard to their own affairs. That the two things are not substantially the same, but essentially different, and that the charge conveyed to the jury an enlarged idea of the right of the bank and of the obligation of the guaranty company, are self-evident propositions.

Error is also assigned upon the court's refusal, at the conclusion of the evidence, to direct a verdict for the guaranty company; the contention being that there was no evidence that Kelley was personally dishonest, or that the loss sustained by the bank was occasioned by his negligence and was one for which he was legally liable to his employer. The evidence was without conflict and may be summarized as follows:

Kelley was the receiving teller of the bank, Collins was its paying teller, and Zwart was its cashier. It was part of Kelley's duties as receiving teller to take the place and to perform the duties of the paying teller during the temporary absences of the latter. Collins was absent on his annual vacation from Saturday evening, August 9th, until Monday morning, August 25, 1902, and his place was filled by Kelley from Monday morning, August 11th, until Saturday evening, August 23d. As temporary paying teller, Kelley was chiefly engaged during business hours in paying out money on checks. His place of work was separated from other portions of the bank by wire partitions and iron frames forming a sort of cage, which was distant about 30 feet from the general vault in which were kept the books, files, and papers of the bank, and a safe for the safekeeping of the cash. Three of four other employees worked at stations between the paying teller's cage and the vault. The safe had two compartments; one called the 'reserve chest,' in which was kept the reserve cash not ordinarily required for immediate use, and another in which was kept what was termed the 'counter 'cash.' By the custom of the bank the counter cash was taken by the paying teller from the safe to his cage in the morning of each business day and was returned in the evening, but the reserve cash remained in the safe during business hours as well as at other times. As occasion required, the counter cash was replenished from the reserve cash, and, when the amount of the former became too large, it was reduced by transferring part of it to the latter. The outer door of the safe was equipped with a time lock and the reserve chest was equipped with a separate lock. The combination to the latter was in the possession of the president, Zwart, and Collins, but was not given to Kelley. The president and Collins were absent during Kelley's service as paying teller, and when it was necessary for him to have access to the reserve cash, which was almost of daily occurrence, Zwart, who was then the managing officer of the bank, would unlock the reserve chest and leave it in that condition for the remainder of the day. In this way the reserve cash was made also accessible to the other employees-- and there were several of them--who had frequent occasion to go into the vault for books, files, and papers. When Kelley was at lunch during the noon hour his place was filled by another employee. At the close of business hours, whatever money had been taken in by other employees during the day was turned over to Kelley as part of the counter cash, and it was then part of his duties to count the counter cash, to place it in the proper compartment of the safe, to count the money in the reserve chest, and to make appropriate entries upon his books of the amount and character of the cash on hand. He would then lock the amount and character of the cash on hand. He would then lock the reserve chest-- which he could do, although he did not have the combination-- and would also set the time lock on the outer door of the safe. When he assumed the duties of paying teller, the money in the reserve chest, as also the counter cash, was counted by him or in his presence, and was found to correspond in amount and character with what was called for by the books. During his service in that station he regularly performed its duties, save that, although instructed so to do, he did not make a daily count of the money in the reserve chest. Instead of that he kept an account of the original amount in that chest and of all amounts taken therefrom or placed therein by him, and at the close of each business day used the amount shown by that account to be in the reserve cash in balancing his books. On Saturday evening, August 23d, after counting the counter cash and placing it in the safe as usual, he locked the safe, entered in his books the amount and character of the cash on hand, and left on a vacation, as had been before arranged. On Monday morning, August 25th, Collins resumed his station as paying teller, and, on counting the money in the safe, found that the counter cash corresponded with the books and with Kelley's entries, but found that there was $5,000 less paper currency in the reserve cash than was called for by the books and by the account kept by Kelley. Kelley returned and assisted in the investigation which followed. There were no errors in bookkeeping which accounted for the loss. It was actual. Zwart, Kelley, and the employee who filled the latter's place during the noon hour each testified that he did not take the money. When or how the loss occurred, or what became of the money, was not more definitely shown than has been stated. In that connection it is well to refer to the following testimony, even though it involves some repetition:

Reynolds, the president of the bank, says:

'This shortage was discovered on the 25th of August, 1902. I did not return until two or three days afterwards. When I did return Kelley was there. Considerable examination was made of the books of the bank with reference to this shortage. We all had more or less to do with the same. It run through a period of perhaps a month. Mr. Kelley participated in the examination. He was given every opportunity to make an examination. I assisted some in it. No discovery was ever made of what became of the money, nor has it ever been paid back to the bank by any one. * * * In this investigation there was nothing to indicate what did become of the money. We did not discover anything. Q. There was nothing to indicate that Mr. Kelley got the money more than any one else? A. We do not know what became of it. In this vault in which this safe was located was contained all the other paraphernalia, business files, letter files, books, and other things, books of collection and everything that was used there from day to day and hour to hour, except what might be stores away for safe-keeping * * * Q. Now, these various clerks and bookkeepers and tellers you refer to had occasion to, and did continuously, go in and out of this vault here in which this safe was contained? A. Oh, yes; they were going in and out for anything they wanted. Q. They went in after their books, collections, and any papers that they wanted to use in the bank? A. Yes, sir; they would go into the vault and get it. Q. They went bank and forth past the door of the safe, did they not? A. Yes, sir; * * * I did not find anything in making this examination as to the shortage, except we found that the shortage was located in his (Kelley's) department by his own books. The other employees who had access to the vault did not keep anything in the safe, and had no right under their employment to go into this safe.'

Zwart, the cashier, says:

No...