{ "id": 2989267, "name": "Auto Truck Steel Body Company, Appellant, v. Chicago Bonding & Insurance Company, Appellee", "name_abbreviation": "Auto Truck Steel Body Co. v. Chicago Bonding & Insurance", "decision_date": "1920-04-30", "docket_number": "Gen. No. 25,174", "first_page": "230", "last_page": "245", "citations": [ { "type": "official", "cite": "218 Ill. App. 230" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "282 Ill. 461", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 4904641 ], "pin_cites": [ { "page": "466" } ], "opinion_index": 0, "case_paths": [ "/ill/282/0461-01" ] }, { "cite": "269 Ill. 608", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 4801008 ], "weight": 2, "pin_cites": [ { "page": "612" } ], "opinion_index": 0, "case_paths": [ "/ill/269/0608-01" ] }, { "cite": "234 Ill. 179", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5640206 ], "opinion_index": 0, "case_paths": [ "/ill/234/0179-01" ] }, { "cite": "159 Ill. 619", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 3132058 ], "pin_cites": [ { "page": "623" } ], "opinion_index": 0, "case_paths": [ "/ill/159/0619-01" ] }, { "cite": "59 Ill. App. 511", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 5151235 ], "pin_cites": [ { "page": "512" } ], "opinion_index": 0, "case_paths": [ "/ill-app/59/0511-01" ] }, { "cite": "94 S. W. Rep. 3", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 0 }, { "cite": "209 Ill. App. 485", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 2912192 ], "pin_cites": [ { "page": "489" } ], "opinion_index": 0, "case_paths": [ "/ill-app/209/0485-01" ] }, { "cite": "91 Ill. 159", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2751419 ], "opinion_index": 0, "case_paths": [ "/ill/91/0159-01" ] }, { "cite": "27 Wash. 429", "category": "reporters:state", "reporter": "Wash.", "case_ids": [ 297820 ], "opinion_index": 0, "case_paths": [ "/wash/27/0429-01" ] }, { "cite": "224 U. S. 346", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3669125 ], "opinion_index": 0, "case_paths": [ "/us/224/0346-01" ] }, { "cite": "289 Ill. 383", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 4964442 ], "weight": 2, "pin_cites": [ { "page": "389" }, { "page": "389" } ], "opinion_index": 0, "case_paths": [ "/ill/289/0383-01" ] }, { "cite": "80 Fed. 766", "category": "reporters:federal", "reporter": "F.", "case_ids": [ 1640534 ], "opinion_index": 0, "case_paths": [ "/f/80/0766-01" ] }, { "cite": "174 Ill. 310", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5537268 ], "pin_cites": [ { "page": "313" } ], "opinion_index": 0, "case_paths": [ "/ill/174/0310-01" ] }, { "cite": "233 Ill. 475", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 3378882 ], "weight": 2, "pin_cites": [ { "page": "481" } ], "opinion_index": 0, "case_paths": [ "/ill/233/0475-01" ] } ], "analysis": { "cardinality": 962, "char_count": 29625, "ocr_confidence": 0.523, "pagerank": { "raw": 5.663806401086183e-08, "percentile": 0.35300494353145684 }, "sha256": "f220f5b4e04814969114d04d5c01a6c27c913ae1055f4c4784c78a6f7844f37a", "simhash": "1:9f4f8ba3c83550e5", "word_count": 5012 }, "last_updated": "2023-07-14T15:22:09.405536+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "Auto Truck Steel Body Company, Appellant, v. Chicago Bonding & Insurance Company, Appellee." ], "opinions": [ { "text": "Mr. Justice Gridley\ndelivered the opinion of the court.\nIn United States Fidelity & Guaranty Co. v. First Nat. Bank of Dundee, 233 Ill. 475, 481, it is decided (1) that a bond which is issued by a guaranty company to indemnify an employer against loss from the dishonesty of an employee is \u201can insurance contract, and as such subject to the rules of construction applicable to insurance policies generally\u201d; (see People v. Rose, 174 Ill. 310, 313); (2) that \u201ccontracts of guaranty insurance are made for the purpose of furnishing indemnity to the assured, and they should be liberally construed to accomplish the purpose for which they are made\u201d; (see Guarantee Co. of North America v. Mechanics\u2019 Sav. Bank & Trust Co., 80 Fed. 766, 772 et seq.); (3) that \u201cthe law is well settled, in its application to insurance contracts, that a misrepresentation of a material fact, in reliance upon which a contract of insurance is issued, will avoid the contract,\u201d and that \u201ca material misrepresentation, whether made intentionally and knowingly or through mistake and in good faith, will avoid the policy\u201d; (see also T. Wilce v. Royal Indemnity Co., 289 Ill. 383, 389); and (4) that a statement in a renewal certificate of a bank cashier\u2019s guaranty bond that his books and accounts were examined by the bank \u201cfrom time to time in the regular course of business\u201d and found to be correct, does not mean that such a thorough and exhaustive examination was made as would necessarily discover the slightest irregularity that might exist, however cunningly covered up; and (p. 484) that \u201cif bank officers are to be held to such a rigid method of examination and supervision over the accounts of their employees there would be but little necessity, if any, for purchasing fidelity insurance.\u201d In Title Guaranty & Surety Co. v. Nichols, 224 U. S. 346, where the action was on a fidelity bond given to protect a bank against the dishonesty of its cashier, it was decided in substance that the mere fact that the examination of the cashier\u2019s books and accounts, made by a competent person, had failed to discover discrepancies covered up by false entries, or other bookkeeping devices, did not necessarily prove that the examination had not been a reasonable one and made in good faith. In Remington v. Fidelity Deposit Co., 27 Wash. 429, a guaranty bond for the faithfulness of an employee, a bookkeeper and cashier, provided that the bond might be continued from year to year, so long as the company should consent, upon payment of the agreed annual premium. About the time of the expiration of the period of the bond, the employer, in order to continue it in force for another year, signed and delivered to the company a certificate that the books and accounts of said employee had been examined and found \u201ccorrect in every respect and all moneys handled by him accounted for,\u201d and that \u201che has performed his duties in an acceptable and satisfactory manner and we know of no reason why his guaranty bond should not be continued. \u2019 \u2019 At the time this certificate was made the employer had no knowledge or suspicion that his employee was in default or dishonest in any way, but as a matter of fact at that time, as it subsequently developed, the employee had embezzled a considerable sum of money. After discovery of the defalcation the employer notified the company, and, upon its refusal to make any payment, brought suit. The bond insured the employer from \u201cpecuniary loss * * * sustained by any act of fraud or dishonesty amounting to larceny or embezzlement * * * occurring during the continuance of this bond, and discovered during said continuance, or within six months after * * * the expiration or cancellation of this bond.\u201d On the trial the court instructed the jury to find for the company and entered judgment in its favor. In reversing the judgment and remanding the cause the court said (p. 441) :\n\u201cThe default was discovered within a month after the renewal was made. Certainly the respondent, under the original contract, was liable for any defalcation discovered within six months after the expiration of the contract, according to the terms thereof. A part of the defalcation complained of had accrued during the first year of the bond, and a part after the renewal thereof.\u201d\nIn the present case it appears from the undisputed facts that prior to the issuance of the original bond plaintiff, the employer of Witt, delivered to the company a written statement making therein certain representations as to then existing facts and as to certain acts to be performed by plaintiff during the period of the bond, which expired (unless continued by future agreement) on May 1, 1918; that these representations were agreed to be considered as warranties and conditions precedent to the issuance and continuance of the bond; that said representations as to the then existing facts were true and correct when made, and that the acts which were represented would be performed by plaintiff during the continuance of the bond were in fact performed in good faith as represented; that Witt began his defalcations in September, 1917, and accomplished them in the manner as above shown by the testimony of the president of plaintiff; that under the conditions existing in.plaintiff\u2019s business, these defalcations were somewhat cunningly performed; that he continued in his dishonest work until about April 27, 1918 (about 4 days prior to the expiration of the original bond), when his defalcations were first discovered; that plaintiff immediately notified the company thereof and fully complied with the conditions of the bond as to notice and proof of loss; that plaintiff as the result of Witt\u2019s acts suffered a pecuniary loss of $908.44; that all of this loss was actually suffered before the expiration of the original bond on May 1,1918, with the exception of $19.31, the proceeds of one of the checks in question which as appears was actually paid out of plaintiff\u2019s funds in bank on May 3,1918; that on March 27,1918, prior to the expiration of the original bond, plaintiff, desirous of continuing the bond in force for another year, delivered its certificate to the company in which it certified (as shown by the paper above set forth) to the honesty of Witt and that he was not then in default to plaintiff; that this certificate was made in good faith by plaintiff but as a matter of fact it was at the time untrue; that the company, relying on said certificate and the representations therein contained, continued said bond in force for another year, beginning May 1, 1918; and that, under the provisions of the original bond, the company was not liable thereunder for any act of the employee after May 1,1918, but that any claim thereunder might be presented within 12 months after May 1, 1918, or, in case of the discovery of the employee\u2019s default prior to May 1,1918, within 12 months after such discovery.\nWe are of the opinion that, under the undisputed facts of the present case and under the law as disclosed from the decisions above referred to, the trial court erred in entering a finding and judgment in favor of the defendant company. We think' that plaintiff was entitled to recover the full amount of its pecuniary loss, less the sum of $19.31, or the sum of $889.13. The loss of the sum of $19.31 occurred during the time that the renewal bond was in force. That bond was issued by the company in reliance upon plaintiff\u2019s certificate of March 27, 1918, above mentioned. The representations therein contained were in fact untrue, although at the time-they were made plaintiff had no knowledge of Witt\u2019s defalcations, and believed said representations to be true and in good faith signed the certificate. But plaintiff as to said representations \u201cassumed knowledge of the facts and cannot now allege want of knowledge.\u201d (T. Wilce Co. v. Royal Indemnity Co., 289 Ill. 383, 389; Hartford Life & Annuity Ins. Co. v. Gray, 91 Ill. 159; Whyland v. Chicago Bonding & Surety Co., 209 Ill. App. 485, 489.)\nIt is here strenuously urged by- counsel for the defendant company that under the decision in the Why-land case, supra, this court should affirm the judgment entered by the trial court in. the present case. We do not construe the decision in the Whyland case as counsel does, and the facts in that case are different from the facts in the present case. In the Whyland case it appears in substance that the company insured the fidelity of plaintiff\u2019s cashier and bookkeeper, Sprange, for one year from November 5, 1913, by delivering a bond containing almost identically the same conditions as the bond now in question, except as to amount; that before the bond was issued, plaintiff, in an \u201c employer\u2019s statement\u201d made certain representations as to audits and examinations of Sprange\u2019s books and ac-\u2018 counts which, it was stated, would be made \u201cat least once in every-months \u2019 \u2019 during the period the .proposed bond was to be in force; that it was agreed that said representations should be considered as warranties; that prior to the expiration of the original bond plaintiff, desiring a renewal thereof for another year, signed and delivered to the company a. certificate, certifying to the honesty of Sprange and his not being then in default, in language almost identical to the certificate in the present case, and the bond was renewed for another year; that during the period of the original bond Sprange became a defaulter; that he commenced embezzling plaintiff\u2019s moneys in June, 1914, and continued doing so from time to time thereafter during the remaining period of the original bond and during a portion of the period of the renewal bond until his dishonest acts were discovered about March 1, 1915; that up to the time of the expiration of the period' of the original bond his embezzlements had amounted to about $1,900, and his subsequent embezzlements brought the total sum up to about $3,050; that no audits or inspections whatsoever of his books and accounts had been made by plaintiff during the period of the original bond; that his embezzlements had been performed in such a clumsy and obvious manner that even a superficial examination, made at any time, of his books and accounts would have disclosed them; and that the jury returned a verdict in favor of the company upon which verdict a judgment was entered accordingly. This court affirmed the judgment on appeal, holding in substance that under the facts and circumstances disclosed plaintiff could not recover for any amount, either for the sums embezzled during the period of the original bond or during the period of the renewal bond; and further holding that it was not a case where an alert examiner, making an honest examination, might not have discovered the frauds, as was the case of United States Fidelity & Guaranty Co. v. First Nat. Bank of Dundee, 233 Ill. 475. The obvious distinction between the facts in the Whyland case and those in the present case is that in the Whyland case the representations, made prior to the issuance of the original bond, as to audits and examinations of the employee\u2019s books and accounts, had not been complied with in any particular, while in the present case they had been fully and in good faith carried out. Furthermore, even if in the present case it would seem, in the light of what subsequently developed, that plaintiff\u2019s auditor, J. B. Cook, was somewhat negligent in not having extended his examination so as, on each audit, to have compared the pay roll lists made out by Witt with the pay roll cards prepared by plaintiff\u2019s superintendent, still, we think, that such mere negligence, if any there was, should not militate against plaintiff\u2019s recovery for the loss sustained during the period of the original bond. (19 Cyc. 831; Fidelity & Guaranty Co. of New York v. Western Bank [Ky.], 94 S. W. Rep. 3; Firemen\u2019s Ins. Co. v. Appleton Paper & Pulp Co., 59 Ill. App. 511, 512; Holdom v. Ancient Order United Workmen, 159 Ill. 619, 623.).\nIt is further contended that, inasmuch as the bill of exceptions or stenographic report does not disclose that plaintiff took an exception to' entry of the judgment appealed from, the sufficiency of the evidence to support the judgment cannot here be inquired into. Previous to the amendment in 1911 of section 81 of the Practice Act (J. & A. 8618), where the case had been tried by the court without a jury as the present case was, this contention would have had merit. (Climax Tag Co. v. American Tag Co., 234 Ill. 179; Miller v. Anderson, 269 Ill. 608, 612.) But since the passage of the amendment to said section of our statutes it has no merit. (Miller v. Anderson, supra; City of Lewistown v. Harrison, 282 Ill. 461, 466.)\nFor the reasons indicated the judgment of the municipal court is reversed and judgment will be entered here in favor of the appellant, Auto Truck Steel Body Company, and against the appellee, Chicago Bonding & Insurance Company, in the sum of $889.13.\nReversed and judgment here for $889.13.\nMr. Presiding Justice Matchett and Mr. Justice Barnes concur.", "type": "majority", "author": "Mr. Justice Gridley" } ], "attorneys": [ "Campbell & Fischer, for appellant.", "Sabath, Staepord & Sabath, for appellee; Charles B. Stafford, of counsel." ], "corrections": "", "head_matter": "Auto Truck Steel Body Company, Appellant, v. Chicago Bonding & Insurance Company, Appellee.\nGen. No. 25,174.\n1. Indemnity, \u00a7 9 \u2014what is nature of indemnity bond. A bond issued by a guaranty company to indemnify an employer against loss from the dishonesty of an employee is an insurance contract and subject to the rules of construction applicable to insurance policies generally.\n2. Indemnity, \u00a7 9*\u2014how bonds are construed. Contracts of guaranty insurance are made in order to furnish indemnity to the assured, and they should be liberally construed to accomplish such purpose.\n3. Indemnity, \u00a7 6*\u2014what is effect of misrepresentation. A misrepresentation of a material fact in reliance upon which a policy of fidelity insurance is issued will avoid' the policy even though the misrepresentation is made through mistake and in good faith.\n4. Indemnity, \u00a7 24*\u2014when plaintiff is entitled to recover. In an action to recover upon an employer\u2019s fidelity bond, held that, under the agreed facts, plaintiff was entitled to recover.\n5. Indemnity, \u00a7 6*\u2014what examination of employer\u2019s boohs is \u25a0 5required. The examination which it is stated, in an application by an employer for a fidelity bond, will be made of the employee\u2019s books is not intended to mean such an examination as will necessarily reveal the slightest irregularity, however cunningly it may be concealed.\n6. Indemnity, \u00a7 6*\u2014what is effect of negligence of auditor in examining boohs. Mere negligence on the part of an employer\u2019s auditor in the manner in which he examines the employee\u2019s books will not defeat recovery by the employer on a fidelity bond.\n7. Appeal and error, \u00a7 1414*\u2014when findings may be reviewed. Since the amendment of section 81 of the Practice Act in 1911 (J. & A. 1 8618), there is no merit in the contention that the sufficiency of the evidence to support the judgment cannot be inquired into on appeal from the judgment in a case tried without a jury, where the bill of exceptions or stenographic report- does not disclose that plaintiff took an exception to entry of the judgment appealed from.\nAppeal from the Municipal Court of Chicago; the Hon. Leo J. Doyle, Judge, presiding. Heard in the Branch Appellate Court at the March term, 1920.\nReversed and judgment here for $889.13.\nOpinion filed April 30, 1920.\nStatement by the Court. In an action, tried before the court without a jury, upon an employee\u2019s fidelity bond issued to plaintiff, the court found the issues against plaintiff and entered judgment against it for costs and this appeal followed.\nThe suit was commenced on July 16, 1918, in the Municipal Court of Chicago. In plaintiff\u2019s statement of claim it is alleged, in substance, that on July 31, 1917, the defendant executed and delivered to plaintiff a certain bond in the sum of $1,000; that the condition of the bond was that, in consideration of a premium of $10, the defendant agreed to reimburse plaintiff, within 3 months after satisfactory proof of loss, for any pecuniary loss sustained by plaintiff by any act of fraud and dishonesty, including larceny or embezzlement, forgery or misappropriation of funds; committed by Frank Francis Witt, in the position of bookkeeper and cashier, during the term commencing May 1, 1917 and ending May 1, 1918; that on April 8, 1918, the defendant issued a continuation certificate by which it agreed that said bond should continue in full force until May 1, 1919, and, together with said continuation certificate, should constitute a single and continued contract of suretyship; that said Witt did not faithfully perform and discharge all his duties as bookkeeper and cashier; that by false entries in the books and records of plaintiff and by other false and fraudulent means he procured plaintiff to issue and pay out certain pay roll checks to persons who, as he then well knew, were not in plaintiff\u2019s employ, by which means large sums of money of plaintiff were paid out to him and others acting in collusion with him, all of which payments were improper, unauthorized and procured by his fraud, to the pecuniary loss of plaintiff in the sum of $908.44; that notice was promptly given to defendant upon plaintiff becoming aware of said Witt\u2019s dishonest acts, and within 90 days after the date of said notice plaintiff filed with defendant its verified and itemized claim; that plaintiff has not recovered any amount of said loss; that said bond is in full force and effect; and that defendant has refused to pay plaintiff any sum whatever on said bond. A copy of the bond, a copy of said continuation certificate and a copy of plaintiff\u2019s said verified and itemized claim were attached as exhibits to plaintiff\u2019s statement of claim. In said last-mentioned exhibit, dated in June, 1918, the following appears: .\n\u201cThe basis of this claim is a loss sustained by the undersigned on account of checks prepared by said Frank Francis Witt ostensibly for the payment of employees of the undersigned which were, in fact, made payable to persons who were not, at the date of said checks, employees of the undersigned and to whom nothing was due from the undersigned. Said checks were prepared by said Frank Francis Witt fraudulently and with the knowledge of the fact that the payments to be effected thereby were improper. The books of the company were falsified by said Frank Francis Witt to conceal' such misappropriation of funds and said checks were cashed by said Frank Francis Witt or other persons acting in collusion with him and with the intent to defraud the undersigned.\n\u201cA list of said checks with the names of persons to \u2019 whom payable, check number, date of check, and date of payments is as follows:\n\u2022 Checks payable to Joseph Bereski.\u201d\n(Here follows a tabulation of the\" numbers of the several cheeks, the respective dates and amounts thereof, and the respective dates when actually paid. The first check is dated September 22, 1917, and the last is dated April 27, 1918. All of the checks are shown to have been actually paid on dates prior to May 1, 1918, except the last check, amounting to $19.31, which appears as having been paid on May 3,1918.)\n\u201cChecks payable to Frank Warga.\u201d\n(Here follows\u2022 a tabulation of the numbers of the several checks, the respective dates and amounts thereof, and the respective dates when actually paid. The first check is dated December 1, 1917, and the last is dated April 19, 1918. All of the checks are shown to have been actually paid on dates prior to May 1, 1918. The total amount of all checks in the two tabulations is $908.44.)\n\u201cEach of the payments made by means of checks above listed was improper and fraudulent, and was made directly by the procurement of said Frank Francis Witt, and resulted in a loss to the undersigned of the amounts thereof.\u201d\nNo denial was made of said defalcations or of the amount thereof, but, in defendant\u2019s affidavit of merits, as a defense, it was alleged that prior to the issuance of said bond, and as a part of the application for its issuance, plaintiff delivered to defendant a certain statement, dated July 25, 1917, designated as an \u201cemployer\u2019s statement,\u201d in part as follows:\nQUESTIONS.\nANSWERS.\n4. (b) How long has applicant been in your service?\n(b) 4 months.\n(c) In what position?\n(c) Bookkeeper and cashier.\n6. (a) Will applicant be authorized to sign checks on your behalf?\n(a) No.\n9. (a) At what intervals will applicant\u2019s books, accounts, stock . and securities be inspected and audited and verified with funds on hand or in bank?\n(a) At least once in every 4 months.\n(b) At what intervals and in what manner will oustanding accounts, a,s shown by applicant\u2019s books or reports, be verified ?\n(b) At least once in every 4 months.\n(d) By whom will above in- , spections and audits be made?\n(d) J. B. Cook, Pub. Acc\u2019t.\n10. (a) Has applicant always faithfully, honestly and . punctually accounted to you for all moneys and property heretofore under his control or custody as your employee?\n(a) Yes.\n(b) Are applicant\u2019s accounts at this date in every respect correct, and proper securities, property and funds on hand to bai- - anee his accounts?\n(b) Yes.\nIn consideration of the issuance of,the above bond * * * the undersigned agrees that the above answers shall be warranties and conditions precedent to the issuance and continuance of the said bond.\nAuto Truck Steel Body Co.\nH. R. Dailey,\nPres.\nThat the plaintiff did not comply with its agreements as set forth in answers to questions 6 and 9 in \u2022 said statement and did not comply with the said contract \u201cin other respects\u201d; that plaintiff cannot recover because on March 26, 1918, there was issued by defendant to plaintiff a certain expiration notice, as follows:\n\u201cWe hereby notify you that Bond No. 43250 for $1000, issued by this Company on behalf of Frank Francis Witt as bookkeeper and cashier, expires on the first day of May, 1918.\n\u201cWe are pleased to advise you that the Company will continue its suretyship on receipt of the annual premiuni of $10, and the attached certificate, and to that end request that you sign the certificate attached and forward with remittance. \u2019 \u2019\nThat upon the receipt of said notice, as a consideration for the continuance of said bond, plaintiff sent to defendant the premium referred to and the following letter:\n\u201cChicago Bonding and Insurance Company,\nChicago.\n'\u201cThis is to certify that since the issuance of the above bond, Mr. Frank Witt has faithfully, honestly and punctually accounted to me for all money and property in his control or custody as my employe, has always had proper security and funds, on hand to balance his accounts and is not now in default to me.\nAuto Truck Steel Body Co.\n\u201cDated March 27, 1918. H. B. Dailey,\n\u201cChicago, Illinois. President.\u201d\nThat the said last communication from plaintiff to defendant was not true; that prior to the date thereof the said Witt had failed to account for the money and property in his control and was short of moneys; that the renewal of said bond was obtained by fraud and misrepresentation and that no recovery can be had thereon; and that, therefore, defendant is not indebted to plaintiff in any sum whatsoever.\nAt the beginning of the trial the attorney for plaintiff stated to the court in substance that the original bond was executed by defendant; that it covered the period from May 1,1917 to May 1,1918; that said Witt was employed by plaintiff as bookkeeper and cashier during said period; that Witt\u2019s defalcations were brought about by his falsifying plaintiff\u2019s books and records and fraudulently securing the issuance of certain pay roll checks; that the total amount received by him was $908.44; and that the only defenses to plaintiff\u2019s claim were those as set forth in defendant\u2019s affidavit of merits. Defendant\u2019s attorney'did not contest any' of said statements. Plaintiff\u2019s attorney further stated in substance that the only defalcations upon which plaintiff\u2019s case is predicated occurred during the period of the original bond and not during the renewal' period, and that consequently defendant\u2019s second defense as above set forth had no bearing upon the c\u00e1se. Thereupon defendant\u2019s attorney said: \u201cWe don\u2019t concede that; we say that on that statement you cannot recover on anything for any sum.\u201d\nPlaintiff then introduced the original bond. Among the conditions precedent to any recovery, as stated in the bond, are the following:\n\u201c6th. That the surety\u2019s liability hereunder shall cease immediately, as to subsequent acts of the employee from and after (a) the first day of May, 1918; (b) discovery by the employer or any of its officers of any default hereunder on the part of the employee; * * * (d) # * * -claim of the employer against the surety must be duly presented to the surety not later than ttoelve months after any such termination of the surety\u2019s'liability.\u201d\nIt appeared, in substance, from the testimony of H. E. Dailey, president of the plaintiff, that on July 25, 1917 (the date said employer\u2019s statement was executed and delivered), Frank Witt had been in plaintiff\u2019s employ as cashier and bookkeeper for about 4 months; that Witt was not authorized to sign checks for plaintiff and never did sign checks during his employment; that'during the year commencing May 1, 1917, and ending the latter part of April, 1918, when Witt was discharged, Witt\u2019s books and accounts were inspected, audited and verified with funds on hand or in bank by J. B. Cook, a public accountant; that said Cook made four separate audits of said books and accounts during the said period, the last one being made dining the latter part of April, 1918, at which time the defalcations of said Witt were first discovered; and that on and prior to July 25, 1917, said Witt had always honestly and punctually accounted to plaintiff for all moneys and property in his custody or control, and on said date his accounts were correct and he had funds and property on hand to balance his accounts. There was no testimony to the contrary. It thus appeared that plaintiff\u2019s representations contained in said employer\u2019s statement were true and correct. It further appeared from Dailey\u2019s testimony, in substance, that plaintiff during said year had over 75 men constantly in its employ; that one of Witt\u2019s duties as cashier was to prepare plaintiff\u2019s weekly pay roll, containing the names of the employees and the amount to be received by each; that this pay roll was prepared from time cards, issued by the superintendent to the several employees and subsequently placed in the possession of Witt; that after preparing the weekly pay roll list Witt wrote out checks for the amount due each employee, and then these checks, together with the pay roll list, were submitted to Dailey, as president, for his inspection; that then the checks were signed by Dailey and countersigned by the treasurer of plaintiff; that in September, 1917, Witt began inserting in each weekly pay roll list the name of a man who had left plaintiff\u2019s employ and who was not entitled to receive any payment; that in December, 1917, he began inserting another such name; that these names thereafter appeared in each weekly pay roll list until some time in April, 1918; that Dailey did not know the names of the various employees; that Dailey signed checks payable to the order of these two men, respectively, supposing they were employees and entitled to receive the amount of the checks; that all checks after being signed were returned to Witt, and as to the checks payable to the order of said two men it subsequently developed that Witt, or a confederate, indorsed and cashed them; and that while Dailey generally compared the pay roll list with the checks presented for his signature, he did not compare said list with the time cards prepared and issued by the superintendent.\nIt appeared from the testimony of plaintiff\u2019s other witness, J. B. Cook, that he had been a certified public accountant since 1910;' that he made four audits of plaintiff\u2019s books during the year from May 1, 1917 to May 1, 1918, and reported to plaintiff thereon; that the ends of the periods covered respectively by said audits were May 31, August 31 and December 31, 1917, and March 31, 1918; that he had about five employees assisting him in making said audits; that he worked on the audit for the period ending March 31, 1918, during the month of April, 1918, and that on April 27, 1918, he first discovered evidences of Witt\u2019s defalcations and immediately notified plaintiff; that in making said four audits he conformed with the usual method of doing the work as done by auditors generally; that in each of the audits he personally did some of the detail checking work, but that the major part of said checking was done by his assistants; that he, however, supervised all work done; that in the first three of said audits the pay roll lists were checked against the pay roll checks, but that he did not personally check the pay roll lists with said superintendent\u2019s pay roll cards; 'and that while working in April, 1918, on said last audit, he personally checked some of said lists with said cards and thereby Witt\u2019s defalcations were first discovered.\nThe only evidence introduced by defendant was the said letter or certificate of plaintiff, dated March 27, 1918, written in reply to defendant\u2019s letter of' March 26,1918,'relative to the renewal of the bond for another year beginning May 1, 1918.\nCampbell & Fischer, for appellant.\nSabath, Staepord & Sabath, for appellee; Charles B. Stafford, of counsel.\nSee Illinois Notes Digest, Vols. XI to XV, and Cumulative Quarterly, same topic and section number." }, "file_name": "0230-01", "first_page_order": 258, "last_page_order": 273 }