White & Bollard, Inc. v. Standard Acc. Ins. Co., 24757.

• Decision Date: 23 November 1933
• Docket Number: 24757.
• Citation: 27 P.2d 123,175 Wash. 174
• Court: Washington Supreme Court
• Parties: WHITE & BOLLARD, Inc., v. STANDARD ACCIDENT INS. CO.

27 P.2d 123

175 Wash. 174

WHITE & BOLLARD, Inc., v. STANDARD ACCIDENT INS. CO.

No. 24757.

Supreme Court of Washington

November 23, 1933

Department 2.

Appeal from Superior Court, King County; George B. Simpson, Judge.

Action by White & Bollard, Inc., against the Standard Accident Insurance Company. Judgment for defendant, and plaintiff appeals.

Judgment reversed and cause remanded, with instructions.

James Tynan, of Seattle, for appellant.

Battle Hulbert & Helsell, of Seattle, for respondent.

GERAGHTY Justice.

This is an action brought by the plaintiff White & Bollard, Inc. against defendant Standard Accident Insurance Company, upon a fidelity bond. From a judgment in favor of the defendant entered upon a directed verdict. the plaintiff appeals.

On June 18, 1931, the respondent executed and delivered to appellant a fidelity bond covering certain of its employees, including Mrs. Edna P. Jacobson, its cashier. Under the terms of the bond, the respondent agreed to part to the appellant the amount of any pecuniary loss it might sustain, not exceeding $5,000, through any act of fraud, dishonesty forgery, theft, larceny, embezzlement, misappropriation, wrongful abstraction, or willful misapplication committed by any of its employees covered by the bond.

Mrs. Jacobson had been the appellant's cashier for twelve years. On September 18, 1931, she took a vacation, and during her absence it was discovered that her accounts were short in a sum over $5,000. The appellant is loan agent in the city of Seattle for the Prudential Insurance Company of America, of Newark, N. J., and as such collects and transmits to its home office payments on principal and interest made by borrowers on account of mortgages held by the prudential. In addition to the Prudential account, the appellant does a general mortgage and loan business. In relation to the Prudential account, a practice had obtained in appellant's office of receiving installments of principal in advance of the interest-maturing dates on which the Prudential would accept such payments. The sums so paid would be held by appellant to its own account and interest allowed until the date when the money was to be remitted to the home office. On September 2d, A. D. Hicks, who had a loan with the Prudential, came to the office of appellant and gave one of its officers a check for $5,025. Of this sum, $5,000 was to be held by appellant for a principal payment on his mortgage in November, and $25 was paid him in cash. The check was, by the officer who received it, delivered to the cashier. She paid Hicks $25, and deposited the remainder in the bank account of appellant, but, instead of crediting the payment to Hicks, caused it to be entered on the books as being made by Alice Johnson. Alice Johnson had, on the previous day, given appellant, on account of a Prudential loan, several checks aggregating $5,025. These checks were deposited to the account of the Prudential by the cashier, but, instead of crediting them to Alice Johnson, she credited them to the accounts of some seventy-two other persons who had theretofore made payments on account of Prudential loans, for which she had not given them credit. As the Johnson payment was made by several checks, she deposited the checks on different days, in order to make the transaction appear more in the course of business. On April 3d, one John Reuter paid appellant $650.97, which the cashier also deposited, but credited to five other persons who had made prior payments for which she had not given them credit. In other words, some seventy-seven persons who had theretofore paid various sums for which they had not been given credit were credited with the Johnson and Reuter payments, and Mrs. Johnson was in turn given credit for the payment made by Hicks.

In making its case, the appellant did not attempt to trace the shortages beyond the seventy-seven items covered by the Johnson and Reuter payments, and rested upon the case made with the showing of the misapplication of the Johnson, Reuter, and Hicks payments, claiming a recovery specifically upon the misapplication of the Hicks payment.

The respondent's principal witness was Mrs. Jacobson, the defaulting cashier. She acknowledged receipt of te Hicks, Johnson, and Reuter payments, and their application as here detailed. She testified that the Johnson and Reuter checks were used to cover up the seventy-seven prior shortages on account of payments made by persons who had not been properly credited with them, and, in further explanation of the defalcation, she testified that, beginning in the latter part of 1926 and for some two years thereafter, she had embezzled various sums aggregating over $6,000; that she had taken the money to help out her husband, who was engaged in business; that she procured a divorce from him in 1929, and thereafter took none of her employer's money, but continued to cover up the shortages by applying payments made in advance, as in the Hicks case, for illustration, to balance prior shortages.

The appellant assigns four errors, but in view of our disposition of the case we will discuss only the first two: (1) That the court erred in acting as the trier of the facts in the case and in directing the jury to return a verdict for the respondent; and (2) that the court erred in holding that, when the cashier took the money paid to appellant by A. D. Hicks and paid the same to the Prudential Insurance Company, she did not thereby misappropriate the funds of the appellant.

In a memorandum opinion filed by the trial judge, he announced he had reached the conclusion that a prima facie case in favor of appellant had not been made out, for the reason that there was no showing that the appellant had lost any money by the misapplication of payments made--either that made by Hicks or by Johnson; that the appellant was not in any different financial condition after those accounts had been collected and put in the bank and credited to the wrong accounts than it was Before . In other words, that appellant did not lose anything at the time those payments were made, and, not having lost, could not recover. In arriving at this view of the law, the court accepted as controlling a line of authorities, of which Royal Indemnity Co. v. American Vitrified Products Co., 117 Ohio St. 278, 158 N.E. 827, 62 A. L. R. 407, is illustrative.

We are not disposed to follow these authorities, but rather the doctrine announced in American Bonding & Trust Co. v. Milwaukee Harvester Co., 91 Md. 733, 48 A. 72, 73. In this case, the court, in passing upon a state of facts very similar to the facts in the case at bar, says:

'The discussion of this point must, therefore, be narrowed to the inquiry whether the fact that the money collected by the agent was paid to the plaintiff, although on accounts other than those so collected, relieved the agent of embezzlement and the defendant of liability. * * * Independent of authority, we cannot understand how the position of the appellant can be successfully maintained. If Brumbaugh had fraudulently converted this money to his own use by paying it to some creditor other than the plaintiff, there could be no question as to the responsibility of the bonding company, and upon what principle can it be relieved merely because he so used it in payment of other debts he owed the plaintiff? * * *

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