Court Opinion

ID: 9827391
Source: CourtListenerOpinion
Date Created: 2023-09-01 17:29:43.829193+00
Date Added: 2024-06-11T07:42:30.239249
License: Public Domain

On Motion for Rehearing.
The able argument filed by counsel for Royal Indemnity Company, in support of its motion for rehearing, vigorously assails the correctness of our decision and the soundness of our reasoning. The pivotal question is, When did the loss occur for which recovery is sought? Appellant cites a number of authorities in support of the proposition that the relation of debtor and creditor, between plaintiff bank and these depositors, arose the moment the deposits were made, and that the entry, or the failure to enter, credits in their favor on the books of the bank, had nothing to do with that relationship.
We do not controvert the correctness of the proposition that, when these five customers deposited money with Spangler, each became the bank’s creditor just as other depositors, but there was this difference, which in our opinion dates the loss at this time: The bank was compelled to discharge its liability to these depositors from resources other than general deposits, either from its capital or earnings. This was not true as to depositors who had been properly credited, and, presumably, were paid in due course of business, from general deposits. The bank sustained no actual loss by paying depositors from general deposits — in effect, that was but the paying back of money previously deposited — but when the bank was compelled, through Spangler’s misconduct, to pay these depositors from resources other than deposits, an actual, as distinguished from a potential, loss was sustained.
Appellant insists that the loss occurred when Spangler appropriated or pocketed money belonging to the bank, and that his acts of concealment neither increased nor in any manner contributed thereto. The word “loss” has a variety of meanings, dependent upon the connection in which it is used. As used in this policy, we think the payment of money by plaintiff to the five depositors constituted and measured an actual loss, which theretofore was simply potential or threatened.
Under the terms of the policy in suit, the obligation of appellant to pay was not -fixed by Spangler’s dishonest or criminal acts; standing alone, these meant nothing; its obligation was fixed only by the resultant loss; therefore, when the cumulative effect of Spangler’s misconduct compelled plaintiff to pay depositors from its resources other than deposits,' an actual loss was sustained, and appellant’s obligation to. pay was thereby fixed. Stag Mining Co. v. Missouri, etc., Co. (Mo. App.) 209 S. W. 321, 323; Lowe v. Fidelity, etc., Co., 170 N. C. 445, 87 S. E. 250.
Appellant insists that State v. Atherton, 40 Mo. 210, is directly in point and supports its contention. We did not refer to this case in the original opinion, because the conditions of the bonds, there and here, are so dissimilar we did not believe the case was in point. The facts of that case, aside from the conditions of the bond involved, are as near identical with the facts of the instant case as is usually found, but the conditions of the bonds differ radically. In the Atherton Case the court held that the bond was for the integrity and faithful performance of duty by the bank teller, and that any act on his part in violation of these conditions amounted to a breach; in other words, the, bond was breached when the teller defaulted. That was not true under the conditions of the bond in suit, for the reason that Spangler’s criminal arid dishonest acts, standing alone, neither breached the bond nor fixed appellant’s obligation to pay.
It is also contended by appellant that Fidelity &"Casualty Co. of New York v. Consolidated National Bank (C. C. A.) 71 F. 116, is also directly in point and supports its contention. The conditions of the bond that fixed the obligation to pay are in legal effect the same as the conditions of the bond under consideration, but the similarity of the cases ends at that point. The facts are not given; it is simply stated that the bank teller was guilty of fraud and dishonesty; that the Indemnity Company admitted liability for an embezzlement of $5,000, committed within twelve months next before the discovery; but recovery was also sought for previous em-bezzlements not discovered, because of the fraudulent conduct of an employee, within the twelve months’ period. The court held that the loss was occasioned by the embezzle-ments of the employee and not by his fraudulent acts of concealment. It does not appear that any loss could have resulted from any act committed by the employee in an effort to conceal his crime; they simply obscured and prevented discovery. In the instant ease, however, gpangler, by daily acts of dishonesty, not only prevented detection for years, but so circumstanced the case as *94to postpone the maturity of the loss as well, with the result that it developed and fell on plaintiff when compelled to discharge its obligation to the five depositors in question. As we view these circumstances, the bank could only have sustained an actual loss by having to respond to its liability as debtor to these depositors.
Spangler’s conduct, in juggling deposits, shifting, money deposited by one customer to the credit of another, thus obscuring his crimes and postponing the maturity of the loss, was acting clearly within the scope of his authority as teller, and, although his conduct was fraudulent and for his own personal benefit, nevertheless the bank’s liability to customers and its obligation to respond was fixed by and according to the method pursued by him. This view, that is, that the bank was bound by the events as ordered by Spangler, is sustained by the doctrine announced by the Supreme Court of United States in the recent case of Gleason v. Seaboard, etc., Co., 49 S. Ct. 161, 73 L. Ed.-, to the effect that the liability of a principal for the conduct of an agent, acting within the scope of his authority, is unaffected by the agent’s fraudulent motives or secret purposes.
If, however, we should be mistaken — if in fact plaintiff’s loss occurred on May 16, 1925, when Spangler applied money deposited by customers of plaintiff bank to the credit of customers of Southwest Bank, of Saturday preceding — American Surety Company should, in our opinion, be held liable to plaintiff for the loss by virtue of the rider attached to its bond issued to Southwest Bank, continuing same in favor of plaintiff as beneficiary, from May 16, 1925, to July 7, 1925.
A careful re-examination has brought a clearer and better understanding of the case, also the discovery of certain expressions in the original opinion, apparently in conflict with our views expressed at this time; hence the original opinion will be altered to harmonize with the views here expressed.
After carefully considering all grounds urged by Indemnity Company for rehearing and finding no reason to change our decision, the motion is overruled.
On appellant’s request, we file additional findings, as follows:
“That on July 6, 1925, Royal Indemnity Company executed its bankers’ blanket bond to North Texas National Bank, agreeing to indemnify the bank from and against any loss through any dishonest or criminal acts of any of its officers, clerks, or other employees, which bond was in full force and effect on September 2, 1925. That the bond issued by the American Surety Company to Southwest National Bank was effective until July 6, 1925, and on the succession of North Texas Bank to Southwest Bank on May 16, 1925, the American Surety Company, by a rider attached to said bond, continued it in full force and effect in favor of North Texas Bank until July 6, 1925, at which date the bond of Royal Indemnity Company became effective. That Spangler’s misappropriation of money and the dates thereof were as follows:
On or before July 7, 1920.$ 1,087 63
On or before August 14, 1922 . 778 22
On or before September 20, 1922. 7,964 60
On or before March 10, 1923..... 4,430 36
On or before July 9, 1923. 6,540 45
On or before January 23, 1924. 8,485 97
On or before July 7, 1924. 7,706 94
On or before July 7, 1925. 1,577 11
Total . $38,571 28
That the last money appropriated by Spangler — that is, by putting it in his pocket —was April 1, 1925.
American Surety Company of New York has also filed motion for rehearing, complaining of the judgment rendered against it in favor of Southwest Bank, for interest, in the sum of $3,341.64. After due consideration, this motion is also overruled.
Both motions for rehearing are overruled.