Case Name: THE TERRITORY OF HAWAII, BY JOSEPH V. HODGSON, ATTORNEY GENERAL OF THE TERRITORY OF HAWAII, v. HOWARD CLARKE, AS PRINCIPAL, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A FOREIGN CORPORATION, AS SURETY ON THE OFFICIAL BOND OF HOWARD CLARKE, AS UNDERCLERK IN THE OFFICE OF THE TREASURER OF THE TERRITORY OF HAWAII
Court: Supreme Court of the Territory of Hawaii
Jurisdiction: Hawaii
Decision Date: 1943-04-08
Citations: 36 Haw. 369
Docket Number: Nos. 2474 and 2477
Parties: THE TERRITORY OF HAWAII, BY JOSEPH V. HODGSON, ATTORNEY GENERAL OF THE TERRITORY OF HAWAII, v. HOWARD CLARKE, AS PRINCIPAL, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A FOREIGN CORPORATION, AS SURETY ON THE OFFICIAL BOND OF HOWARD CLARKE, AS UNDERCLERK IN THE OFFICE OF THE TREASURER OF THE TERRITORY OF HAWAII.
Judges: Kemp, C. J., Peters, J., and Circuit Judge Buck in Place of Le Baron, J., Absent.
Reporter: Hawaii Reports
Volume: 36
Pages: 369–384

Head Matter:
THE TERRITORY OF HAWAII, BY JOSEPH V. HODGSON, ATTORNEY GENERAL OF THE TERRITORY OF HAWAII, v. HOWARD CLARKE, AS PRINCIPAL, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A FOREIGN CORPORATION, AS SURETY ON THE OFFICIAL BOND OF HOWARD CLARKE, AS UNDERCLERK IN THE OFFICE OF THE TREASURER OF THE TERRITORY OF HAWAII.
Nos. 2474 and 2477.
Submitted February 2, 1943.
Decided April 8, 1943.
Kemp, C. J., Peters, J., and Circuit Judge Buck in Place of Le Baron, J., Absent.

Opinion:
OPINION OF THE COURT BY
KEMP, C. J.
These appeals are by the Territory of Hawaii. The appeal in number 2474 is from the oral decision of the circuit judge. After that appeal was perfected, the circuit judge filed a written decision and caused a decree to be entered. The appeal in number 2477 is from the decree. The disposition of the appeal in number 2477 will also dispose of the appeal in number 2474.
It is admitted that the defendant, Howard Clarke, from April 1, 1939, to June 7, 1940, was an employee of the Territory of Hawaii, in the office of the treasurer. From April 1, 1939, to about January 1, 1940, he was an "under clerk" and thereafter until June 7, 1940, he was a "corporation clerk." As such employee he furnished the bond upon which action was commenced in the circuit court against him and the United States Fidelity and Guaranty Company, the surety on his bond.
Revised Laws of Hawaii 1935, section 134, provides that the bond of any officer or employee in any government department from whom a bond is required under the authority of this subtitle (said subtitle embraces sections 133 to 146) shall be substantially in the form set forth therein. Section 145 of said subtitle provides that, in every case where bonds for the faithful performance of duty are not required by law of officers or employees in any department, the head of the department may require every such officer or employee to give such bond. Section 146 of said subtitle provides that whenever any such bond sháll be required by the head of a department "the amount of the penalty and the conditions of the bond shall be such as the head of the department shall deem proper." The bond given by Mr. Clarke upon which action was brought was not required by law. The amount of the penalty and the conditions of his bond were therefore prescribed by the head of the department. The conditions of his bond departed from the conditions prescribed by section 134 to the extent of adding thereto the words enclosed in brackets in the following excerpt from the bond sued npon:
"NOW, THEREFORE, if the said HOWARD CLARKE shall faithfully perform all the duties of his office, appointment, position or employment which are now or may hereafter be required, prescribed or defined by law or by any departmental rule or regulation made under the express or implied authority of any statute, or by any order, direction or command of the head of the department, bureau, office or service in which said obligor is engaged or employed, and all duties and acts undertaken, assumed or performed by said obligor by virtue or color of his office, appointment, employment or position, and shall safely keep, promptly pay over to those legally entitled thereto, and faithfully account for all moneys [and/or property of the United States and/or of the Territory of Hawaii] which may come into his possession or control by reason of his undertaking, assuming, performing or doing any of the aforesaid duties or acts, then this obligation shall be void; otherwise it shall be and remain in full force and virtue and may be enforced in any manner or by any proceedings authorized by law."
The Territory commenced a proceeding on the foregoing bond by a motion for judgment as provided by section 144, Revised Laws of Hawaii 1935, against the principal, Howard Clarke, and his surety, United States Fidelity and Guaranty Company. The allegations of the movant charging a breach of the conditions of the bond are, in substance, that during the term of the bond the. said Howard Clarke failed and neglected to safely keep, promptly pay over to those legally entitled thereto, to wit, the Territory of Hawaii, and faithfully account for moneys in the amount of $500 coming into his possession or control by reason of his undertaking, assuming, performing or doing the duties of his office and appointment, and has since failed and neglected to pay over, produce or account for said moneys in the value and amount of $500, although demand has been made that he do so. Demand upon the surety to pay the $500 was also alleged.
The anstver of the defendant Clarke admitted his employment and execution of the bond, as alleged, but denied all other allegations of the complaint. The surety company denied all of the material allegations of the complaint.
At the hearing it developed that the moneys which the movant claims Clarke failed and neglected to safely keep, etc., consisted of $100 out of each of four checks for $110 remitted to the treasurer of the Territory by as many foreign corporations, and $100 out of another sum of $110 paid over the counter in cash. Each of said corporations at the time owed the Territory $10 for filing its annual exhibit as of the preceding December 31, and on the succeeding July 1 would owe a license fee of $100 for the next twelve months. It is admitted that out of each remittance and payment of $110 the filing fee of $10 for the annual exhibit was properly accounted for. The litigation Avas occasioned by the disappearance or loss of the remaining $100 remitted or paid by each of the five corporations under the circumstances hereinafter more fully related.
After a hearing the circuit judge, in his written decision, made the following findings of fact and conclusions of law:
"Howard Clarke entered the employ of the Treasurer of the Territory as under-clerk on April 1, 1939, and was assigned the duties of corporation clerk in January, 1940. In the latter capacity Mr. Clarke was engaged chiefly in routine clerical work, including the writing out of receipts for corporation fees and the preparing of corporation licenses. He was not authorized to sign receipts nor to issue licenses. Mr. Clarke remained in bis employment as corporation clerk until the 7th of June, 1940.
"In March, 1940, the Western Auto Supply Co. paid over the counter to Howard Adams, Second Deputy Treasurer of the Territory, whose duties included those of cashier, $110 in cash, of which $10 was due at the time as filing fee for the corporation's annual exhibit, and $100 would become due on July 1, 1940, for foreign corporation license. Mr. Adams gave the company an official receipt for the $10 and a temporary receipt for the $100, both receipts being signed by him.
"During May, 1940, four checks for $110 each were received at the Treasurer's office from as many corporations, namely, Pressed Steel Car Co., Frye & Co., Electrical Research Products Co., and Perfection Stove Co. Each check included $10 presently due as filing fee for annual exhibit, and $100 to become due on July 1, 1940, for foreign corporation license fee. An official receipt was signed by Mr. Adams for each sum of $10, which receipt bore a notation that $100 was being held until July 1, 1940. Three of these receipts were written out by Mr. Clarke and one by Mr. Kahoopii, the assistant cashier. No official or other receipt was ever issued for the four sums of $100. Each of the four checks was cashed by Mr. Adams from the funds of the Territory and the $10 deposited with the general cash. The four sums of $100, as well as the $100 from Western Auto Supply Co., Avere placed by Adams or by another at his direction in an unsealed envelope kept in a tray on a movable carriage, to be held until July 1, 1940. This carriage Avas kept in the inner section of the cashier's cage during business hours, and at night Avas rolled into the vault. A check-up made in the latter part of June and into July, by persons in the Treasurer's office, revealed that the $500 from the companies named was missing from the envelope.
"The evidence pertaining to the custody and control of the $500 in question is conflicting. Mr. Adams testified that it was the custom of the office to turn all such funds over to Mr. Clarke, and that the money Vas entrusted to his (Clarke's) custody'. Mr. Clarke testified that there were more cheeks and cash in the envelope than he had placed there, indicating that others had also placed funds in the envelope; he also stated that as to currency given him from checks cashed by Mr. Adams, he would label it and put it in the envelope, 'all of which took place there in the cashier's cage', and that he never left the cashier's cage with any such cash fees. The Court has observed the demeanor of these two witnesses on the stand and their manner of responding to the questions put to them, and believes Mr. Clarke and does not believe Mr. Adams. As a result, the Court finds that Howard Clarke faithfully performed all his duties as corporation clerk and accounted in the manner required of him for all moneys of the Territory coming into his possession or control."
The appellant has specified as error the following: (a) The court erred in its decision in finding "that the five $100.00 sums were placed by Mr. Adams or by another at his direction into the envelope kept for that purpose in the cashier's cage"; (b) "that Mr. Clarke accounted for all moneys coming into his possession and control"; and (c) that the court erred "in entering its decree denying the motion of the Territory."
From this it will be seen that the only finding of fact which the Territory attacks is the finding quoted in more detail to the effect that the five sums of $100 "were placed by Adams or by another at his direction in an unsealed envelope kept in a tray on a movable carriage, to be held until July, 1940. This carriage was kept in the inner section of the cashier's cage during business hours, and at night was rolled into the vault." The other two specifications of error attack the conclusions of law.
While it may be said that the findings of fact made by the circuit judge do not include the controlling facts, his conclusions of law may not be set aside if the evidence discloses facts sufficient to sustain them.
We think the controlling facts (which are not controverted) are (a) that there Avas in force during the period of the bond a departmental rule or regulation Avhich required that such moneys as those involved in this litigation should not be kept by the corporation clerk in his possession but should be deposited by him in the receptacle kept for that purpose in the cashier's cage during the day and in the vault at night, and (b) that the bond in question obligated the respondent Clarke to "faithfully perform all the duties of his employment Avhich are or may hereafter be required by any departmental rule or regulation made under the express or implied authority of the head of the department in Avhich said obligor is engaged or employed ." The import of the established rule or regulation is shoAvn by the folloAving excerpts from the testimony of Mr. H. H. Adams, second deputy treasurer and cashier:
"We have a provision in the office that these fees or moneys collected were not to be left around in the various desks which could be easily broken into if somebody desired. They were put in envelopes and turned over to one of the cashiers to be put in a receptacle that in the evenings was locked up, at night, in the big vault." "they were put in a box and this box was kept in a movable carriage that was wheeled into the cashier's cage during the day and wheeled into the vault during the noon hour and at night, and locked up, and this particular container was kept in there so it would not be in a place where it would be accessible to anybody." "This box being kept in the cashier's cage, there is a door to the cage and people could pass reasonably close, but they would be outside of the door. Two people are allowed in the cage and actually handle the money and properly appointed to do so, just the two cashiers."
It is pertinent to here observe that no evidence was produced tending to establish that Mr. Clarke failed or neglected to comply with the departmental rule or regulation for the disposition of such moneys, or that, after he had done so by depositing it as required of him, he, with or without authority, removed it or any part of it from the place prescribed by the departmental rule or regulation for its safekeeping and appropriated it or any part of it to his own use. If he should be held liable under these circumstances for the loss or disappearance of the money in question, it would necessarily be on the theory that he obeyed the departmental rule or regulation at his peril, notwithstanding the condition of his bond which required him to "faithfully perform all' the duties Avhich are now or may hereafter be required by any departmental rule or regulation of the head of the department in which said obligor is engaged or employed ."
Revised Laws of Hawaii, section 139, provides inter alia that "Every bond required or given under the authority of this subtitle, shall be construed to cover all duties required by any departmental rule or regulation or by any direction, order or command of the head of the department and all such duties and acts shall be considered to have been performed or done by specific requirement of statute ." Thus, it appears that the departmental rule or regulation prescribing the duties of office personnel as to the disposition of such moneys having been incorporated in the bond as one of its conditions, tbe obligor is entitled to tbe same protection as a specific requirement of statute would have given bim.
J. V. Hodgson, Attorney General, and W. D. Ackerman, Deputy Attorney General, for the Territory.
R. W. Loomis for appellee, Howard Clarke.
Robertson & Castle and R. B. Jamieson for appellee, United States Fidelity & Guaranty Co.
The cases relied upon by the Territory do not sustain its position. By reference to The United States v. Prescott et al., 44 U. S. 577, 588, cited by the Territory, it will be seen that the conditions of the bond control. Said tbe court: "The condition of the bond has been broken, as the defendant, Prescott, failed to pay over the money received by him, when required to do so; and the question is, whether be shall be exonerated from the condition of his bond, on the ground that the money had been stolen from him?
"The objection to this defence is, that it is not within tbe condition of tbe bond; and this would seem to be conclusive."
In the bond involved in tbe Prescott case there was no condition such as tbe one here involved and above quoted. As we construe tbe language of that case, it holds that if tbe moneys had been stolen as tbe result of his having acted in accordance with a condition of bis bond, he would have been exonerated. In the case at bar it seems quite evident that the loss of the $500 was due directly to the inadequacy of the rule or regulation promulgated by the head of the department for its safekeeping, and that Mr. Clarke disposed of the moneys which came into his possession or control by reason of his employment strictly in accordance with the departmental rule or regulation which was made a condition of his bond. Consequently, we hold that the decree entered by the circuit judge correctly disposed of the case.
The decree appealed from is therefore affirmed.