Rath v. Indemnity Insurance of North America

WILLIS, J., pro tem.

Judgment on findings and conclusions was entered in the court below against appellant for $2,134.26 and interest, upon a “broker’s blanket bond” issued by appellant to respondent to indemnify him against any losses suffered through certain prescribed acts of his employees while he was engaged in the brokerage business in Los Angeles. The bond provided indemnity for loss sustained by the insured (a) through any dishonest act of any of the employees whenever committed and whether committed directly or by collusion with others, and (b) through larceny, whether common law or statutory, robbery, burglary,. hold-up, theft or other fraudulent means. It further provided that “this bond does not cover any loss directly, or indirectly from trading, actual or fictitious, whether in the name of the insured or otherwise, and whether or not within the knowledge of the insured, and notwithstanding

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any act or omission on the part of any employee in connection therewith, or with any account recording the same”.

One Lee R. Crittenden was, after April 21, 1930, a customer of respondent, he having on that date signed one of respondent’s regular margin cards. In respondent’s employ at the times herein mentioned was one Shepard, as a margin clerk, and one Tomberlin, as messenger boy; also one James was employed as an order clerk, whose duties consisted in communicating from respondent’s office to New York or other markets all orders for the purchase and sale of securities. On June 13, 1930, there was given to James an order, purporting to be signed by Crittenden and approved “by Salesman G-. M. Tomberlin”, to buy certain stock. James inquired of Shepard whether Crittenden had sufficient margin to cover such order, to which Shepard replied that the margin was “ O. K. ” James thereupon executed the order with the respondent’s correspondent on the New York Exchange; and the purchase price of the stock was charged by the correspondent company against respondent’s account. On June 16, 1930, a similar transaction was accomplished in the same manner and with similar result, creating a debit in the New York house against respondent in the total sum of $7,285. Both these transactions were without Crittenden’s knowledge or authority, which fact was not discovered by respondent until July 8, 1930, whereupon respondent at once took possession of the stock so purchased by transferring it from the Crittenden account to his own. On that date this stock was of the value of only $5,200, a decrease of $2,175 from the purchase price, for which amount, less $40.74 of salary due Shepard or Tomberlin, which respondent retained and credited on the loss, or $2,134.26, respondent seeks to hold appellant liable under the bond in question. After trial the court found in effect that the acts of respondent’s employee were wrongful, fraudulent and dishonest, that the employee had appropriated to his own use certain funds belonging to respondent on deposit with the New York correspondent and that by reason of such dishonest acts respondent had suffered damage in the sum of $2,134.26, with interest thereon. The court further found that respondent was not engaged in trading according to the general acceptance of said term in the transactions in question, and that the loss suffered was not a trading, loss so