William H. Granger and Others, Appellants, Respondents, v. The Empire State Surety Company, Respondent, Appellant

William H. Granger and Others, Appellants, Respondents, v. The Empire State Surety Company, Respondent, Appellant. Fourth Department, May 5, 1909. Principal and surety — contract indemnifying against loss by dishonesty of employees — when surety liable— appeal—when judgment may be modified by appellate court. One who has agreed to indemnify an employer against such pecuniary loss as may he sustained by reason of the fraud or dishonesty of employees, including salesmen; amounting to embezzlement or larceny connected with their duties, is liable for moneys collected by a salesman from customers of the insured and converted; where the bond does not define the duties of salesmen. This is so, whether the orders for the goods sold were given to the salesmen personally or directly to the insured. But the insurer is not liable for the purchase price of goods stolen by a salesman and sold by him to customers of the insured. , ' Where at trial the facts were agreed upon by stipulation, the appellate court may modify the judgment of the court below and direct final judgment. Williams, J., dissented; Cross-appeals by the plaintiffs, William H. Granger and others, and by the defendant, The Empire State Surety Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Erie on the 10th day of December, 1907, upon the decision of the court rendered after a trial before the court without a jury at the Erie Trial Term. The plaintiffs seek to recover upon a bond of indemnity made by the defendant surety company to the plaintiffs, dated January.!, 1903, covering a period of one year from that date, by which it undertook to make good and reimburse to the plaintiffs upon certain terms and'conditions therein named : “ Such pecuniary loss as may be sustained by the Employer by reason of the fraud or dishonesty of any or either of the Employees named upon said Schedule or added thereto, as hereinafter provided in connection with his duties as specified on said Schedule, amounting to embezzlement or larceny.” The bond further provided: “ And the Company shall not be liable for other than the personal acts of the Employees within the direct scope of their duties named in said Schedule or in said notices.” Of the employees named in the schedule attached to the bond, twelve are classified'as salesmen, one as salesman and collector, one as invoice clerk, two as billing clerks, one as cashier, and one as bookkeeper; but their respective duties are not specifically defined. The liability of the surety company is limited to $2,000 for each employee. ■ The two persons who defaulted are Ell Ritter and Charles W. Stone, classified as salesmen. In the proof of claim made on behalf of the plaintiffs it is stated that they were employed in the capacity of salesman and collector.. It appears that on the 1st day of January, 1903, the date of the bond, Ritter and Stone were employed by the plaintiffs in the capacity of salesmen, and to collect the purchase price of goods sold by them or to their customers; that in the discharge of their duties they traveled and visited customers, and solicited and took orders for the sale of plaintiffs’ goods upon credit from certain designated customers only and regularly; that no one else in the plaintiffs’ employ or on the plaintiffs’ behalf solicited orders or trade from these customers; that Stone and Ritter also collected the purchase price of the goods sold by the plaintiffs to such customers, which collections were made after such goods had been sold and delivered by the plaintiffs to the respective customers; but the goods were never intrusted for delivery to Stone or Ritter, and neither rightfully ever had any possession of such goods; that when the goods were delivered the plaintiffs sent invoices of such deliveries to the purchasers, and thereafter sent monthly statements of account to them. It further appears that Ritter stole $929.76 and Stone $1,388.48 during the term of the bond; that $684.16 of the sum stolen by Ritter was collected by him for the purchase price of goods stolen by Mm from the plaintiffs, and sold and personally delivered by him to the plaintiffs’ customers; that $1.78 was collected by Ritter from customers to whom he had regularly sold the plaintiffs’ goods for the purchase price of goods the sale of which was not directly effected by him, but by direct' orders by telephone from the customers to the plaintiffs; that $143 of the sum stolen by Stone was collected by him from customers to whom he regularly sold the plaintiffs’ goods’ for the purchase price of goods the sale of which was not directly effected by him, but by direct orders by telephone ’ from the customers to the plaintiffs ; that the balance of the money stolen by Stone and Ritter was money collected by them during the term of the bond for the purchase price of goods theretofore sold and delivered by the plaintiffs during such term, upon orders solicited and procured by Stone and Ritter, directly effecting the sale thereof. The trial court held that the $684.16 stolen by Ritter is covered by the bond; that none of the other moneys stolen by either Ritter or Stone is covered by the bond, and judgment was directed only for $684.16, with interest from the commencement of the action. Both parties appeal, the plaintiffs claiming that the bond covers, and that the defendant is liable for all the moneys stolen by Bitter and Stone, the defendant contending that it is not even liable for the amount for which judgment was directed against it. Harry D. Williams, for the plaintiffs. James O. Moore, for the defendant. [MAJORITY — Kruse, J.:] Kruse, J.: It is urged on behalf of the defendant that none of the moneys collected and misappropriated by Bitter and Stone is covered by the bond because the default- did not arise out of any acts of the ' employees within the direct scope of their duties as salesmen. It is contended that the duty of .a salesman does not include that of collecting the purchase price of goods sold, when the sales are made as they were made by these employees; and that as regards the goods stolen, no recovery can be had for the purchase price thereof, for the reason that Bitter and Stone were never intrusted with the delivery of the goods, nor ever had possession of the goods rightfully. If it be true that the bond contemplated that the duties of salesmen did not include either having possession of the goods or receiving the purchase price, it is difficult to conceive any purpose in making the bond at alb Numerous cases are cited by counsel for the respective parties, but in none of them is the obligation and the circumstances so like tins case as to afford much light upon the question here presented. In view off the absence of anything in the bond defining the duties of these salesmen and their actual duties at the time the bond was given, as indicated by the way in which the sales were made to the customers of these salesmen, and the purchase price received by them for the goods so sold, it is a reasonable conclusion, as it seems to me, that the bond was intended to cover the moneys received by Bitter and Stone for goods sold to their designated customers, whether sold upon orders taken by them personally, or given directly to the plaintiffs. But I am unable to see how the defendant is liable for the purchase price of goods stolen by Bitter. The fact is conceded that the plaintiffs never intrusted the delivery of the goods to him, or that he ever rightfully had them in his possession. If the company is only liable for such acts as were within the direct scope of his duties as a salesman, and those duties did not require him to have possession of the goods, the wrongful act was not committed in connection with his employment. Counsel for the plaintiffs assumes that in connection with their duties the salesmen had access to the place where the goods were stored; that they were able to go about the plaintiffs’ premises unquestioned, and that they handled the goods within the store; but the record is entirely devoid of any such proof, and, as it seems to me, the facts as stipulated are quite to the contrary. As regards the money received for the goods and embezzled by the employees, it is different. The bond seems to contemplate that the employees would háve possession of moneys belonging to the plaintiffs, since the defalcation must amount to an embezzlement or larceny to make the defendant liable, according to the terms of the bond. The amount for which Bitter defaulted is $929.76, and the amount of Stone’s defalcation is $1,388.48, making in all $2,318.24. The amount collected., by Bitter for goods stolen and sold by him is $684.16, leaving a difference of $1,634.08, .for which the defendant is liable. Upon the facts which the trial court found, none of which is in dispute, as the attorneys for the respective parties stipulated the facts, final judgment may be directed here. (Dixon v. James, 181 N. Y. 129.) The judgment should, therefore, be modified by increasing the amount of the plaintiffs’ recovery for damages to $1,634.08, with interest thereon from June 8, 1904, the date specified in the judgment, and as so modified affirmed, but as neither party has been entirely successful here, neither should recover costs against the other upon this appeal. All concurred, except Williams, J., who dissented. Judgment modified by increasing the amount of plaintiffs’ recovery to the sum of $1,634.08, with interest thereon from June 8, 1904, and as ■ so modified affirmed, without costs of this appeal to ■ either party.