Ridgway Audit, Inc. v. Oberlin, Inc.

BARNARD, P. J. This is an action to recover a payment alleged to be due under a written contract. On May 8, 1951, the plaintiff and defendant signed a contract authorizing the plaintiff to make certain “audits” at two stores operated by the defendant. These so-called audits were to consist of sending in shoppers to make pretended purchases for the purpose of testing the efficiency and honesty of defendant’s employees. So far as material here, the contract provided that the plaintiff agreed to investigate and report on the conditions found with respect to the efficiency and honesty of the employees, to talk in a proper manner “to any person shown to be dishonest,” and to return the merchandise thus purchased. The defendant agreed to refund the purchase price of such merchandise, and “Upon the completion of service, pay Ridgway Audit, Inc., a fee of $100 per audit per store and fifty percent of all recoveries made; whether recovery is made at time of audit or at a later date.”

This action was brought on January 23, 1953. A copy of the contract was attached to the complaint, and it was alleged that “the plaintiff entered into the performance of its duties in accordance therewith, and did discover thefts on the part of one employee in an amount admitted by said employee to be in the sum of $8736.00”; that said sum “has been recovered or recaptured by the defendant”; and that the defendant is indebted to the plaintiff in the sum of $4,368. These allegations were denied by the defendant.

At the trial it developed that the defendant had purchased a policy of fidelity insurance, under the terms of which a bonding company had guaranteed it against loss by theft on the part- of its employees; that a series of thefts by one employee had occurred; and that late in 1952 the bonding company paid $8,432.80 to the defendant in payment of its liability under the bond. The plaintiff completed an audit on April 28, 1952, and a day or two later submitted a report to the defendant. This report contained no suggestion of dishonesty or theft on the part of any employee.

On May 1, 1952, Mr. Oberlin had a conversation with Mr. Sans, a member of plaintiff’s organization, in which he told Sans that he had definite information of the dishonesty of one of his employees and asked Sans to interrogate this [111]employee with reference thereto. Oberlin had acquired this information from the manager of one of defendant’s stores,- and prior to that time the defendant had received no information from the plaintiff that they had discovered this employee to be dishonest or voicing any suspicion of such a fact. Later that day, a meeting was held at which Mr. Sans, Mr. Oberlin, the defendant’s accountant, and the employee in question were present. Mr. Sans questioned this employee, who confessed, and a representative of the bonding company was called in. The employee signed a written statement admitting that during the preceding 728 days he had stolen a total amount of $8,736. Mr. Sans later went with Mr. Oberlin to the district attorney’s office, where Mr. Oberlin made a complaint charging this employee with grant theft. The employee fled and went to Mexico, and the bonding company later paid the defendant $8,432.80. The district attorney’s office recovered $200 in merchandise from this employee’s home, and the defendant retained $200 of pay which would otherwise have been due to this employee. Mr. Oberlin testified that he had told a representative of the plaintiff that the matter of paying them half of whatever was recovered from the bonding company “would be presented to my directors and that he would be paid.” This evidence was offered and admitted solely “as evidence of the interpretation placed up the contract by this witness,” and not as evidence of “an independent obligation.” The only other evidence in this connection was Oberlin’s further testimony that when the contract was signed they discussed this provision and he was told that “any thefts that they have discovered, anything like that, that they would have 50 percent title to it.”