Opinion
Opinion Filed October 3, 1967
Insurance. Evidence. Appeal and Error. Fraud. Trial. Criminal Law.
1. In action by bank against insurer to recover under "banker's blanket bond" for loss sustained by means of false pretenses, bank had burden of proving that drawer of check on which payment was stopped and for which there were insufficient funds on deposit had fraudulent intent to pass bad check.
2. The measure of proof required to establish a criminal charge in a civil proceeding is by a preponderance of the testimony, with presumption of innocence favoring the party accused.
3. Intent of drawer of check on which payment was stopped and for which there were insufficient funds on deposit to defraud was essential element which bank had to establish by preponderance of evidence in bank's action against insurer to recover under "banker's blanket bond" for loss sustained by means of false pretenses.
4. Supreme Court would consider all evidence at trial in light most favorable to defendant on appeal from directed verdict in favor of a plaintiff.
5. Whether drawer of check on which payment was stopped and for which there were insufficient funds on deposit had fraudulent intent to pass bad check was question for jury in bank's action against insurer to recover under "banker's blanket bond" for loss sustained by means of alleged false pretenses where volume of money handled in drawer's business transactions was large and drawer's bank balance fluctuated greatly.
6. Fact that payment of check given by drawer's agent to bank was refused by stop payment order did not alter offense of delivering the check with intent to defraud in bank's action against insurer to recover under "banker's blanket bond" for loss sustained as result of alleged false pretenses where there was question of whether drawer was guilty of false pretenses on sufficiency of funds or credit which he had at the time the check was uttered.
7. Fraud is never presumed and must be established by clear and satisfactory evidence.
8. One seeking to establish fraud has the burden of proof.
9. Where the evidence affords room for opposing inferences on the part of reasonable men, it is error to direct a verdict.
10. Where fair-minded and unprejudiced men may reasonably differ in the conclusion to be drawn from undisputed facts, it is error to direct a verdict, for the question is one of fact for the jury.
11. Where fraud is alleged and fair-minded and unprejudiced men could reasonably differ in conclusion to be drawn from the facts, question is one of fact for the jury even though facts are undisputed.
12. Whether there was evidence in bank's action against insurer to recover under "banker's blanket bond" for loss sustained as result of alleged false pretenses that tended to support bank's charge that drawer of check which was dishonored had caused bank a loss of property by false pretenses was for the trial court.
13. If trial court finds that there is any evidence reasonably tending to support charge as made by bank that drawer of insufficient funds check caused bank a loss of property by false pretenses so that insurer would become liable under "banker's blanket bond," whether such evidence was sufficient was question for jury in bank's action against insurer to recover under bond.
14. Where an offense is charged in a criminal cause, the jury must find the evidence sufficient to prove the offense charged beyond reasonable doubt, while in a civil cause, when an offense is charged, the jury need only find that the offense has been proved by the plaintiff by a preponderance of the evidence.
Civil Action by bank against insurer to recover under "blanket bond" for loss allegedly sustained by false pretenses. Trial by Jury, Caledonia County Court, December 1966 Term, Sylvester, J., presiding. Verdict for bank. Reversed and Remanded.
Kyle T. Brown and Arthur L. Graves for plaintiffs.
McKee Clewley for defendant.
June Term, 1967
Present: Holden, C.J., Shangraw, Barney, Smith and Keyser, JJ.
This action was brought by the plaintiff bank against the defendant insurance company upon a standard form of "Banker's Blanket Bond" issued by the defendant to the plaintiff. The clause of the bond upon which recovery is sought is loss of property suffered by the bank by means of "robbery, burglary, common-law or statutory larceny, theft, false pretenses, holdup" and the like.
The bank complains that while the policy was in full force and effect that one John T. Dowd by means of "larceny and false pretenses" obtained the sum of $4,000.00 from the bank. The undisputed evidence is that the $4,000.00 was given by the bank to Dowd's agent in return for a check for that amount, dated Nov. 8, 1963, drawn on the Society National Bank of Cleveland, Ohio, and signed by Dowd. Payment of the said check was refused by the Society National Bank by reason of a stop-payment order issued by Dowd. Dowd filed a petition in bankruptcy in the United States District Court for the Northern District of New York on Nov. 25, 1963, and it is undisputed that, except for a 30 per cent payment on the face amount of that check from the bankruptcy court, the plaintiff has never received the face amount of the check.
At the close of the evidence in the cause below, the motion of the plaintiff for a verdict directed in its favor was granted by the lower court. The appeal here was taken by the defendant insurance company from this verdict and the resulting judgment. The only question presented here is whether the lower court should have granted the plaintiff's motion for a directed verdict.
As conceded by the brief of the plaintiff, the only issue presented by the pleadings is whether the plaintiff's loss due to the cashing of a bad check was induced by false pretenses. Extensive evidence was presented by the plaintiff on the financial transactions of John T. Dowd, apparently engaged in the business of coin and currency brokerage, and on the fluctuations of Dowd's bank account at the Society National Bank, particularly as to its condition on the date when Dowd drew the check here in question.
Recovery by the bank is sought from the insurance company on that clause in the policy which provides for reimbursement for loss suffered by reason of "false pretenses." Although the action here is a civil one, it charges John T. Dowd with the performance of a criminal act.
Under 13 V.S.A. § 2002: "A person who designedly by false pretenses or false token and with intent to defraud, obtains from another person money or other property, or a release or discharge of a debt or obligation, or the signature of a person to a written instrument, the false making where would be punishable as a forgery . . . ." is guilty of a felony. The burden was on the plaintiff bank to prove Dowd's commission of the criminal act. The measure of proof required in this jurisdiction to establish a criminal charge in a civil proceeding is by a preponderance of the testimony, with the presumption of innocence favoring the party accused. Livanovitch v. Livanovitch, 99 Vt. 327, 329, 131 A. 799; Lindley v. Lindley, 68 Vt. 421, 35 A. 349. "The presumption of innocence in criminal causes shall attend the accused until the jury renders a verdict of guilty, and the court shall charge the jury accordingly . . ." 13 V.S.A. § 6502.
The statute makes clear that an intent to defraud is one of the essential elements which it was necessary for the plaintiff to establish by a preponderance of the evidence to establish that John T. Dowd was guilty of false pretenses in the civil case before us.
The crux of the charge of false pretenses against Dowd in this instance is whether or not, on Nov. 8, 1963, when Dowd's check was cashed at the plaintiff bank, Dowd had the fraudulent intent to pass a check for which he had insufficient funds on deposit to meet the check.
While all evidence in the trial below was adduced by the plaintiff's witnesses, when considered in the light most favorable to the defendant, which we must do here, it is not so conclusive of a fradulent intent on the part of Dowd as to eliminate any factual question on this issue.
The evidence is that the volume of money handled in Dowd's brokerage transactions was large by most standards. During the period between October 11, 1963 to November 8, 1963, for example, checks in the amount of $1,723,475.38 were drawn on the Society Bank of Cleveland and deposits in the same account over the same period totalled $1,728, 369.57. The evidence also clearly indicates that Dowd had a line of credit with the Society Bank to cover overdrafts, which credit was not withdrawn until some time in early November, 1963. Plaintiff's expert testified that it was doubtful that Dowd knew his actual Society Bank balance at any one occasion. As an example, on Nov. 8, 1963, the date on which the check was passed on the plaintiff bank, Dowd's Society Bank balance fluctuated from an overdraw of $70,711.59 to a credit balance of $65,575.35. On Nov. 14th, the date of the refusal of the Society Bank to honor the check here in question, at various times during that day there were credit balances in Dowd's account in the Society Bank ranging from $31,940.17 to $85,522.02, although the end of the day found the account overdrawn.
The fact that payment of the check given by Dowd's agent to the plaintiff bank was refused by a stop-payment order does not alter the offense of delivering a check with intent to defraud, but it still leaves the question of whether Dowd was guilty of false pretenses on the sufficiency of funds or credit which he had at the time the check was uttered in the Society Bank. 35 C.J.S. False Pretenses, § 21, page 839.
Fraud is never presumed and must be established by clear and satisfactory evidence, as to which the plaintiff had the burden of proof. Leno v. Meunier, 125 Vt. 30, 35, 209 A.2d 485.
Where, as here, the evidence affords room for opposing inferences on the part of reasonable men, it is error to direct a verdict. This is so, even though the facts are undisputed where fair-minded and unprejudiced men may reasonably differ in the conclusion to be drawn. In that situation, the question is one of fact for the jury. This is particularly true in cases where fraud is alleged. Spaulding v. Mutual Life Insurance Co. of New York, 94 Vt. 42, 57, 109 A. 22; New England Acceptance Corp. v. Nichols, 110 Vt. 478, 486, 8 A.2d 665; Pacific Lumber Agency v. National Aircraft Materials Corp., 108 Vt. 10, 15, 182 A. 192.
As in a criminal cause, the question whether there was any evidence reasonably tending to support the charge as made by the bank here that Dowd had caused them a loss of property by false pretenses so that the insurance company would become liable under the policy, was one for the court. But, also, as in a criminal cause, whether such evidence, once found to be present, was a question for the jury. State v. Schwarzchild, 112 Vt. 167, 169, 22 A.2d 177. The difference being that in a criminal cause, the jury would have had to find the evidence sufficient to prove the offense charged beyond a reasonable doubt, while in a civil cause, it need only find that the offense had been proved by the plaintiff by a preponderance of the evidence.
Cases in which the trial court should direct a verdict in favor of a party having the burden of proof are exceptional. Such an exception did not exist here where the weight and sufficiency of the evidence to establish the intent to defraud on the part of Dowd was a question of fact to be determined by the jury, and not a question of law for the determination of the court.
Reversed and remanded.