United States Fidelity & Guaranty Co. v. Egg Shippers' Strawboard & Filler Co.

• Decision Date: 06 October 1906
• Docket Number: 2,318.
• Citation: 148 F. 353
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. EGG SHIPPERS' STRAWBOARD & FILLER CO.
• Court: U.S. Court of Appeals — Eighth Circuit

148 F. 353

UNITED STATES FIDELITY & GUARANTY CO. v. EGG SHIPPERS' STRAWBOARD & FILLER CO.

No. 2,318.

United States Court of Appeals, Eighth Circuit.

October 6, 1906

J. 0 P. Wheelwright (Albert C. Cobb and J. L. Stevens, on the brief), for plaintiff in error.

William C. Howell (Walter H. McElroy and H. Scott Howell, on the brief), for defendant in error.

Before SANBORN, HOOK, and ADAMS, Circuit Judges.

HOOK Circuit Judge.

This was an action by the Egg Shippers' Company upon a bond of the Guaranty Company insuring the former against loss through the fraud or dishonesty of one Boardman, its treasurer. The plaintiff was an Iowa corporation organized by dealers in poultry and eggs, and its business was the purchase and sale of fillers for egg cases used in transportation. Though of small capital it was thriving and prosperous from its organization down to the time of the conduct of its treasurer, which furnished the cause of this litigation. The fillers it dealt in were purchased from the manufacturer, the Tama Paper Mills & Filler Company, under a contract providing that the plaintiff should accept and honor the drafts of the Tama Company, due in 15 days, for all manufactured fillers which it ordered shipped, and drafts payable in 30 days for the remainder of the contract quantity that was manufactured but not desired for immediate delivery. The contract specified that bills of lading should be attached to the first class of drafts, showing the fillers had been shipped and warehouse receipts to the other class of drafts, showing that the fillers covered by them had been manufactured and were actually in the warehouse subject to the plaintiff's order. Boardman was the treasurer of the plaintiff, with authority to execute notes and accept drafts representing its bona fide indebtedness. He was a salaried officer, and the financial management of the plaintiff's affairs was largely in his charge between directors' meetings, which were held semiannually. At one meeting his official report showed that he had allowed the Tama Company to overdraw its account about $2,600. He was at once instructed by the directors that he must not continue such course; that they were not satisfied of the integrity of the manager of the Tama Company; that he must secure fillers balancing the overdraft; and that in the future nothing should be paid and no drafts should be accepted unless the goods already manufactured had either been shipped or were held in the warehouse subject to plaintiff's order, and unless those conditions were shown by bills of lading or warehouse receipts.

There was substantial evidence tending to show the following facts and on appeal we must assume them to be true. Boardman violated his official duty, ignored his instructions concealed his conduct, and falsified his reports. When the crash came, there was outstanding about $70,000 of negotiable paper of the Tama Company upon which Boardman had obligated the plaintiff by way of accommodation, and in addition to this he had advanced to the Tama Company about $10,000 for which he had no bills of lading or warehouse receipts. These sums amounted to more than seven times the plaintiff's capital, and the Tama Company soon failed for a large sum. The plaintiff was made bankrupt. Boardman was found to have been using plaintiff's money in his own affairs. He left the state soon afterwards, taking with him the check stubs, canceled checks, drafts, and vouchers pertaining to plaintiff's business, having previously refused to allow his successor in officer to examine them, for the reason as he alleged, that they also concerned his personal business. The items which entered into plaintiff's verdict for $8,700 were $3,000 of a credit which Boardman took in his accounts as having paid an obligation of the plaintiff, when, in fact, he had not paid it, $590.24 which the plaintiff paid upon one of the accommodation acceptances that was held by an innocent purchaser and was therefore an obligation which plaintiff could not escape, and $5,130 which Boardman paid to the Tama Company without bills of lading or warehouse receipts. These items amount to a little more than the recovery, but it is probable that the jury omitted the odd dollars and cents to make a round sum. Each of them represented an actual loss to the plaintiff. It is true that all that Boardman did of a fraudulent and dishonest character was not directly connected with these items, but it is also true that all of the loss included in the recovery resulted from a willful and inexcusable betrayal of his trust, and the evidence of his general course of conduct in the plaintiff's affairs was properly admitted to show the spirit and intent that moved him. In such cases the scope of inquiry necessarily takes a wide range, and we are of the opinion that the latitude allowed by the trial court did not go beyond the legal limits. The defendant claims that there was no showing of a breach of the fidelity bond which was conditioned to 'make good and reimburse to the employer (the plaintiff) all and any pecuniary loss sustained by the employer, of money, securities or other personal property in the possession of the employe (Boardman), or for the possession of which he is responsible, by any act of fraud or dishonesty on the part of said employe, in the discharge of the duties of his office or position. ' Another clause of the bond provided that its true intent and meaning was that the defendant should be responsible only 'for moneys, securities, or property diverted from the employer through...