Liberty Mutual Insurance v. Kleinman

SHINN, P. J.

Liberty Mutual insured Dietzgen Company against loss suffered through the dishonesty of its employees. Los Angeles Blue-Print Company, a subsidiary of Dietzgen Company, was covered by the policy. Leon Tanner Eddy, manager of Blue-Print, took 80 checks payable to his employer, stamped the employer’s endorsement, added his name as manager, cashed the cheeks and appropriated the proceeds to his own use, in the total amount of $7,446.19. Plaintiff paid this amount under its policy. Defendants Kleinman and Hertz-berg cashed 54 of the cheeks in the total amount of $4,556.51 and the present action against Kleinman and Hertzberg is by the insurer, claiming as subrogee of Blue-Print. At the conclusion of the trial the court made findings in favor of plaintiff and entered judgment in its favor. Upon motion for a new trial the court vacated the findings and conclusions, made new ones, and entered judgment for defendants. Plaintiff appeals.

[406]

There was no conflict in the evidence and there appears to be no doubt as to the applicable legal principles. It was held in

Meyers

v.

Bank of America,

11 Cal.2d 92, 102 [77 P.2d 1084], that the right of subrogation does not exist in favor of a surety on a fidelity bond except against persons who participated in the wrongful act against the surety’s principal; the right of the surety to recover from a third party is governed by equitable principles and there can be no recovery unless the equities in favor of the surety are superior. (In accord

J. G. Boswell Co.

v.

W. D. Felder & Co.,

103 Cal.App.2d 767 [230 P.2d 386].) The factual issue at the trial was whether defendants were guilty of negligence. The complaint alleged that defendants knew or should have known that Eddy had no authority to cash the checks. This was treated as a sufficient allegation of negligence and was denied by the answer. The court found the allegation to be untrue. The finding is assailed as being without support in the evidence.