Case ID: ohio-cc-ns_7/html/0066-01.html
Source: Caselaw Access Project
Author: {"author": "", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

EMBEZZLEMENT BY THE SECRETARY OF A BUILDING ASSOCIATION.
    [Circuit Court of Cuyahoga County.]
    J. B. Livingston et al, Trustees Guarantee Savings & Loan Company, v. The Fidelity & Deposit Company.
    Decided, June 26, 1905.
    
      Building Associations — 'Embezzlement by Secretary of — By Issue of Oheclcs in Fictitious Fames — Liability of Surety on Secretary’s Bond.
    
    Where the secretary of a building association procures the issue of checks of the association in the names of fictitious applicants for loans, and endorses them in the names of the fictitious payees, his collection of such checks would estop him from asserting their original invalidity, even if they were invalid, and would amount to embezzlement under Section 6843.
    Henry, J.; Marvin, J., and Winch, J., concur.
    Error to the court of common pleas.
   This proceeding in error is prosecuted by the -trustees of the Guarantee Savings & Loan Company, against the Fidelity & Deposit Company -of Maryland, to reverse the judgment of the Cuyahoga County Common Pleas Court. The parties here stand in the same relation as they stood below. The error complained of is the finding of that court that the petition fails to state facts sufficient to constitute a -cause of action.

The corporation of which plaintiffs in error -are trustees is organized under the building and loan laws of Ohio-, and its officers and employes were bonded by the defendant in error, which is a surety company organized under the laws of Maryland.

Among the -officers -and employes whose fidelity was thus guaranteed by the blanket bond issued by the surety company to the local -corporation, was the latter’s secretary, Jacob A. Blodt, who served as such for five years, beginning June 1, 1896, and -ending August 8, 1901, and who, after swindling his company to- the- extent of $209,100, committed suicide. The action below was commenced to recover, on -his last annual bond, the full limit thereof, $10,000. The provisions of the bond make it applicable to Blodt’s defalcation, if it amounts to embezzlement or larceny, and was perpetrated within the direct scope of his duties as secretary; but not otherwise.

Blodt’s plan of operation was to buy cheap vacant lots in Cleveland under divers fictitious names, and in the same names to apply to 'his company for loans wherewith to erect buildings thereon, . His board of directors granted the loans, on his recommendation, and issued checks therefor to the order of the fictitious applicants. Blodt was entrusted with these checks, and it was his duty to see to their application to the intended purposes, according to the usual custom of building and loan associations. Blodt, however, collected or deposited the checks for his own be-hoof, after endorsing them in the names of the fictitious payees.

The surety company claims that this scheme did not amount to either a larceny or am embezzlement of either checks or moneys.

It is argued that the cheeks were worthless, because the payees were fictitious, and that, therefore, such checks could not be the subject of either crime. And it is further argued that under Revised Statutes, Section 3836-4, the treasurer was the exclusive custodian of the association’s moneys, and that such moneys could not lawfully be transferred from his custody to that of the secretary. There could be, it is claimed, no embezzlement of such moneys by the secretary under Revised Statutes, Section 6842, because they did not ‘ ‘ come into his possession by virtue of his appointment or employment as such officer;” neither was there a larceny of such moneys under the rule laid down in Kellogg v. State, 26 O. S., 15.

It is not clear that Blodt might not lawfully have had possession of the money® of the association, if transferred to him from the treasury by the board of directors for specific purposes, in view of the broad provisions' of the last two paragraphs of Revised Statutes, Section 3836-3, and in view of the equally broad implications of Revised Statutes, Section 3836-25. But a majority of the court are unwilling to hold, under the facte alleged in the petition, that such a transference of the mere custody of moneys actually took place in this case. There can be no doubt, however, that the cheeks were lawfully in his possession as secretary. Were they of value, within the meaning of Revised Statutes, Sections 6842 and 6843, defining embezzlement ?

Smith W. Beimett .and Smith, Taft é Arter, for plaintiff in error.

Hoyt, Dustin & Kelley, for defendant in error.

People v. Boyce, 106 Cal., 173 [37 Pac. Rep. 630], is a similar case in this, that the defendant there was convicted of embezzlement of a draft which was claimed to be void and without value, because money was thereby sought to be made' payable out of the treasury of the United States, to a person other than the one authorized by law to receive payment. But the accused, having actually obtained the cash thereon, converted it to his own use; and the court held that he was thereby estopped from saying that it was not a valid draft. Adopting this view,' we therefore hold, that under the circumstances set forth in the petition below, the checks which Blodt cashed, or oolected, and converted to his own use, were things of value, and that he was guilty of embezzlement, within the meaning of our statutes, and of the bond sued upon in this ease.

The demurrer to the petition should have been overruled, and the judgment below is, therefore, reversed and the cause remanded.