85 Ga. App. 164 | Ga. Ct. App. | 1951
Lead Opinion
1. In determining on demurrer whether the alleged loss to the insured plaintiff was covered by the fidelity bond sued upon, two questions arise: first, whether the loss was a direct loss of money “belonging to the insured or for which the insured is legally liable,” or was of “premiums, . . collected and retained by the employee,” according to clause (e) of the rider attached to the National Surety Corporation’s bond referred to; and second, whether the loss is alleged to have been caused by reason of the dishonesty of the employee or by larceny, embezzlement, forgery, misappropriation, wrongful abstraction or any other fraudulent or dishonest act or acts. In the case of Hurt & Quin Inc. v. National Surety Corp., 81 Ga. App. 683 (59 S. E. 2d, 722), supra, it was held that the petition showed that the loss was of money belonging to Whitner & Company, which
Considering the alleged transactions as a whole, including the allegations of agency contained in this petition but which were omitted from the petition in Hurt & Quin Inc. v. National Surety Corp., supra, it may be seen that the moneys in Whitner & Company’s hands were premiums belonging to the insurance companies just as much as if they were the actual moneys collected from the individuals insured. The premiums were collected in small amounts weekly from the many individuals insured and were paid to the bank. The bank had previously advanced the full annual premium, on each policy issued, to Whitner & Company as agent, thereby financing the tranactions. Whitner & Company remitted the funds received from the bank, less commissions, to the plaintiff, and the plaintiff in turn sent the money to the insurance companies. There was also a flow of the unearned premiums in the opposite direction. As individual policies were canceled, presumably for non-payment by the individuals insured of their weekly instalments on the full premium, so that no further amounts were coming to the bank through the local agent in payment of the full premium advanced by the bank, then the bank was to receive so much of the full premium advanced as had not been earned by the insurance companies. This reverse flow of funds was accomplished by directing Whitner & Company to turn a portion of the premiums
It is alleged that, under the general agency .contracts which the plaintiff, Hurt & Quin Inc., had with the fire insurance companies, the plaintiff was bound to account for and pay over the premiums due the respective companies. So, it seems that the alleged loss was of money belonging to the plaintiff or for which the plaintiff was liable, and was not merely an indebtedness of the local agent, Whitner & Company, to the plaintiff.
2. As to whether the loss was caused by the dishonesty of Whitner & Company, the petition alleges that Whitner & Company “diverted” the premium funds, and that the shortage was later discovered by an audit; whereas in Hurt & Quin Inc. v. National Surety Corp., supra, the allegation was that Whitner & Company “failed and neglected” to pay over the funds. In the case of Massachusetts Bonding &c. Co. v. Raskin, 43 Ga. App. 582 (159 S. E. 778), the contract covered losses arising “by any act or acts of fraud, dishonesty, forgery, theft, larceny, embezzlement, wrongful abstraction or wilful misapplication on the part of the employee,” and it was there said, “The offenses mentioned involve moral turpitude. Dishonesty certainly carries with it the idea of a wilful wrong, and, in our opinion, the same is true of 'wrongful abstraction' and 'wilful misapplication.' In short, any act or conduct which makes the company liable under the contract connotes wilful wrong, and not merely an innocent mistake, or negligence.” In that case it was alleged that the loss “arose by reason of the failure of the said Rosenthal to return to petitioners monies, goods, and merchandise sold or withdrawn by him from the stock while it was in his possession,, custody, and control.” [Emphasis added.] The court there: held that no wilful, wrongful conduct on the part of the employee was alleged, and that the alternative allegation in the petition as quoted above was insufficient to state a cause of action. But
The bond in the present case is substantially similar to the bond in Massachusetts Bonding &c. Co. v. Raskin, supra. The Lloyd’s excess bond covered loss by reason of the dishonesty of the plaintiff’s employees, and by reference incorporated the indemnity clause of the National Surety Corporation’s primary bond, insofar as not in conflict therewith, covering losses caused by larceny, embezzlement, forgery, misappropriation, wrongful abstraction or any other fraudulent or dishonest acts of the insured’s employees. To allege a loss under the terms of the bond, it must appear that the employee or local agent caused the loss by his own wilful wrong, rather than by an innocent mistake or negligence.
The allegation that Whitner & Company “diverted” the premium remittances which it had received from the bank shows that Whitner & Company intentionally turned the flow of the plaintiff’s money into other channels from that of its proper transmission to the plaintiff or to the bank as directed by the plaintiff. Such conduct by an agent under the facts as here alleged indicates a wilful wrong in the nature of a misappropriation. In the National Surety Corporation case, supra, it was alleged that Whitner & Company “failed and neglected to pay over such sums,” which was equally consonant with mere negligence and inability to pay due to other causes, as it was with fraud and dishonesty. In the present case it is alleged that Whitner & Company “diverted” the money, causing the loss complained of. The difference between the two allegations is that the latter connotes a wilful act, which, when done by an agent in handling his principal’s money, amounts to a wilful wrong or a fraudulent or dishonest act, and such act as here alleged would come within the terms and coverage of the fidelity bond sued on in this case. Therefore, the petition set out a cause of action, and the trial judge erred in sustaining the general demurrers of the defendant thereto.
Pursuant to the act of 1945 (Ga. L. 1945, p. 232, Code, Ann.
Judgment reversed.
Dissenting Opinion
dissenting. It is my opinion that the ruling in the second division of the opinion in Hurt & Quin Inc. v. National Surety Corp., 81 Ga. App. 683, is decisive of the issue in this case and until reversed should control this case. The majority opinion bases its rulings on two so-called distinctions between the two> cases; the first, that in this case it is alleged that Whitner & Company “diverted” the funds, whereas in the above case it was alleged that it “failed and neglected” to pay over the funds. I concede that the instant case differs from the former case in this respect but in the National Surety case, in view of the ruling in the second division of the opinion, it would have been immaterial whether it was alleged that Whitner & Company diverted the funds, failed or neglected to pay them over or embezzled them, because one cannot embezzle his own money. Since the court in that case held that the money belonged to Whitner & Company, the allegations as to what it did with respect to them added nothing to the statement of the cause of action. The second distinction between the two cases, as relied on by the majority opinion, is that it is alleged in the instant case that the borrowed funds were to be disbursed by the bank and were disbursed directly to Whitner & Company as local agent of Hurt & Quin. I think the petition and exhibits in the National Surety case showed the fact that the money borrowed was to be paid by the bank to Whitner & Company as local agent of Hurt & Quin. There was a rider in the National Surety case, attached to the master policy, providing that “it will not be necessary, however, for said bank to wait until said list has been furnished to this company or acknowledged by this company before disbursing the amount of such loan to this Company’s agent, Whitner & Company.” The allegations of both petitions alike show that the bank was to disburse the borrowed money to Whitner & Company, and show that Whitner & Company was designated as agent of Hurt & Quin, but such designation as agent was not done for the purpose, nor did it have the effect, of rendering the borrowed funds