author: ANDERSON, Judge.

text:
    LOCKE DISTRIBUTING COMPANY, a Corporation, Plaintiff-Respondent, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a Corporation, Defendant-Appellant.
    No. 32260.
    St. Louis Court of Appeals. Missouri.
    Sept. 20, 1966.
    Motion for Rehearing or to Transfer to Supreme Court Denied Oct. 19, 1966.

      Rader & Grimm, William S. Rader, Stanley A. Grimm, Cape Girardeau, for defendant-appellant.
    Finch, Finch, Knehans & Cochrane, Jack O. Knehans, Marvin E. Wright, Cape Gir-ardau, for plaintiff-respondent.
   ANDERSON, Judge.

This is a suit on a bond issued by defendant, Hartford Accident and Indemnity Company, to plaintiff, Locke Distributing Company. By its terms, defendant agreed to indemnify plaintiff subject to certain conditions and limitations against loss of money or other property through any fraudulent or dishonest acts of any of plaintiffs employees to an amount not to exceed $10,-000.00. Recovery was sought for a loss alleged to have been sustained by plaintiff through the dishonest acts of two of its employees, namely, Helen Baker and her husband, Gene Baker. The prayer of the petition was for $10,000.00 with interest from March 1, 1963, together with a ten percent penalty and an attorney’s fee of $2500.00 for vexatious refusal to pay under Section 375.420, RSMo 1959, V.A.M.S. The trial resulted in a verdict for the principal sum of $10,000.00, interest of $900.00 and an attorney’s fee in the amount of $1,500.-00. No penalty was assessed. From the judgment on this verdict, defendant has appealed.

The insuring clause of the bond reads as follows:

“The Underwriter, in consideration of the payment of the premium, and subject to the Declarations made a part hereof, the General Agreements, Conditions and Limitations, and other terms of this Bond, agrees to indemnify the Insured against any loss of money or other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others, to an amount not exceeding in the aggregate the amount stated in Item 3 of the Declarations.”

The limits of liability stated in Item 3 of the Declarations was $10,000.00.

The only condition and limitation material on this appeal appears under the heading “Exclusion” and is as follows:

“SECTION 2. This Bond does not apply to loss, or to that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of money or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees.”

The bond was obtained through Fred Springer of Popp and Springer Insurance Brokers in Cape Girardeau. This firm represents five or six insurance companies, including Hartford Accident and Indemnity Company, defendant herein. It is also engaged in the real estate business. The bond sued on was not signed by this firm or any of its members. It was in full force and effect during the time plaintiff suffered the alleged losses for which plaintiff seeks recovery in this action.

Locke Distributing Company is a wholesale distributor of Falstaff Beer in eleven counties in southeast Missouri. Its main office and warehouse is located in Cape Girardeau. Branch offices and warehouses are maintained in Miner, in Kennett and in Poplar Bluff. Harold W. Locke is president of the Company and his son, Harold W. Locke, Jr., is its vice-president. Harold W. Locke is primarily the general manager of the Company’s various offices and warehouses.

Helen Baker and her husband, Charles E. (Gene) Baker were employed to operate the business at the Poplar Bluff office and warehouse from 1959 to February 12, 1963. Helen was employed as a bookkeeper in the Company’s office and her husband, Gene, performed duties as a salesman operating out of the Poplar Bluff warehouse. His duties were to load a truck each day with cases and packages of beer and call on licensed retailers of beer such as owners of taverns and package stores. Each day he had a separate run or territory. Before starting on his route, he would fill out a “daily truck sheet,” showing the number of export cases, quarts, seven ounce and cans loaded onto the truck. When making a sale, a sales ticket was filled in, showing the name of the person to whom the beer was delivered, the customer’s license number, the date of the sale, the amount of beer delivered, and whether it was a cash or charge sale. If the sale was for cash, the ticket was marked “paid,” but if credit was extended, the customer was supposed to sign the ticket. These tickets were contained in a book and were in triplicate, i. e. an original and two carbon copies. The practice was to send the first copy to plaintiff’s Cape Girardeau office, the second copy was left with the purchaser; the third copy remained in the Poplar Bluff office. Each book contained fifty sets of tickets numbered serially. The salesman, at the end of his day’s run, would turn in the used tickets together with the checks received and cash collected from customers to the bookkeeper at the Poplar Bluff plant.

Helen Baker was office manager and bookkeeper at Poplar Bluff. Her duties consisted in making a daily report, an original and carbon copy, showing the number of cases or packages of beer sold the previous day, whether for cash or on credit, the number of empties picked up, and the amount of money collected and deposited in the bank as a result of the day’s operation. She made deposits in the bank of Poplar Bluff of the money and checks received, filling out at that time deposit slips in duplicate. All deposits were in the account of Locke Distributing Company. A copy of the deposit slip was sent to the Cape Girar-deau office each day. The original daily report was also sent to the Cape Girardeau office and the carbon copy remained in the Poplar Bluff office. Each month, statements were sent direct from the bank to the Cape Girardeau office. Mrs. Baker would enter the charges and credits in an accounts receivable ledger, showing the name of the purchaser, the name of the town where purchaser operated, the date of sale, the serial number of the sale ticket, and the total charge. Any empties which were picked up would be credited and the balance extended in the usual way.

In June 1960, Walter Buchheit, advertising and contact man for plaintiff in the Poplar Bluff territory, called Mr. Locke by telephone from Poplar Bluff and informed him there was not enough beer in the warehouse to operate the next day’s run. The last warehouse stock report showed there was enough beer on hand there to operate several days. Nevertheless, Locke sent more beer to Poplar Bluff that day. Locke later received a stock report dated June 6, 1960, which indicated a shortage of a thousand and some packages, which according to Locke’s testimony, would amount to a loss between three and five thousand dollars. This was not reported to the bonding company. After receiving the stock report, it was checked for clerical mistakes. Harold Locke, Jr., and Bob Harper then went to Poplar Bluff to make an inventory of the contents of the warehouse, and to check the reports. Locke testified that his reaction to the report of June 6, 1960, was that “there must be a mistake some place in the clerical work or accounting for that amount of beer being short. * * * I went over there and I talked to Helen Baker and Gene Baker in regard to this shortage. I tried to run their reports. They knew nothing about it. * * * She said she knew nothing about it and I said, ‘This is a sizeable shortage.’' She said ‘Do you think we took it?’ I said, ‘No * * * I can’t account for it, let’s start checking the records.’ ” Mr. Locke further stated that at that time he tried to find whether there was a mistake by checking the stock reports, but was unable to locate a shortage. Thereafter Bob Harper, defendant’s office manager at Cape Girar-deau checked the inventory a number of times.

In August 1962, Fred Carr, of the C. P. A. firm of Hoche & Barklage, and Bob Harper made a physical inventory of the contents of the Poplar Bluff warehouse. Over objection, Mr. Carr testified that he found approximately 190 cases of empty beer bottles surrounded by cases of full bottles. When Locke received this report, he again talked to the Bakers and tried to check the reports.

In January 1963, the deposit slips and reports from the Poplar Bluff office began arriving three or four days late. When this situation developed, Mr. Locke sent Bob Harper to Poplar Bluff to make a complete audit and to remain there until Mrs. Baker completed three delinquent reports. Harper was also sent back in February 1963, to do the same thing. His report to Mr. Locke on these two occasions was that there was an inventory shortage.

On February 12, 1963, Cecil Compton, Walter Buchheit, Harold Locke, Jr., and Harold Locke, Sr., met at Poplar Bluff. Compton was an advertising man and auditor employed by plaintiff. Buchheit was an advertising man employed by plaintiff. He was also referred to in the testimony as a contact man. They went to the plaintiff’s warehouse, arriving there five or ten minutes before the Bakers. When the Bakers arrived, Mr. Locke told them to take a two weeks vacation, during which time Compton would take over the office, and Buch-heit would assume Gene Baker’s duties as route salesman. Locke asked for and the Bakers surrendered their keys to the warehouse and office.

Locke and his men then attempted to prepare a statement of the accounts and in doing so discovered that the accounts receivable ledger showed $132.00 owing from Raymond Eastwood. Eastwood had been out of business for three or four weeks, and Locke sent his son to see Eastwood to find out why the account had not been paid.. Eastwood produced a cancelled check for the amount shown on the ledger to be owing, and a sales ticket marked “paid” by Gene Baker.

That same morning, Buchheit started out on the run he had taken over from Gene Baker. He was furnished a statement of the accounts of that run which had been prepared by Mr. Locke and Cecil Compton. He was to check the tickets and accounts which had been taken from the accounts receivable ledger. His first stop was at a place operated by one McCracken where he presented a ticket. McCracken informed him that the amount claimed to be due had been paid, and produced a ticket marked “paid.” Buchheit reported this to Mr. Locke by telephone. Locke testified that about that time Helen Baker picked up the ledger and threw it down and said “ ‘Well you have me, * * * I owe all of this. * * * Well its. mine, I’ve taken it.’ ” This testimony went in over defendant’s objection that it was hearsay.

Thereafter Buchheit called on thirty-nine other customers who had tickets marked “paid” which were, according to the company records, charge accounts. Each and every account on the ledger was checked. Mr. Joe Scholl, another employee of plaintiff, assisted Buchheit in this check. At the trial, Mr. Buchheit produced a list of the false accounts which he had found and it was stipulated that they amounted to a total of $3,796.50.

The evening of February 12, Locke returned to Cape Girardeau and called John Popp, of Popp and Springer, and told him of the shortage. Popp inquired as to how much the shortage was, and Locke replied, “ ‘John, I don’t know at the present time, we are going to have to check each and every account and it will take me some time, what shall I do ?’ ” Popp told him to go ahead and check the accounts and as he progressed with it, to report to him from time to time, and he would take care of it “like that.”

On February 14, 1963, there was another meeting with the Bakers. Those present were Mr. Locke and Cecil Compton. On this occasion, the Bakers agreed to sign a confession. It was prepared by Mr. Locke, and witnessed by Mr. Compton. Mr. Locke testified that the Bakers read the statement before they signed it. At the time, Helen Baker inquired if Mr. Locke was going to have them arrested and put in jail. Mr. Locke assured her he was not stating he had a bond and was going to report the matter to the bonding company. The statement was offered as plaintiff’s Exhibit 8 by plaintiff and received in evidence over an objection that it was hearsay evidence, and the further objection that the Bakers were in court under subpoena and available to testify with reference to the matters disclosed therein. Said exhibit reads as follows:

“We Helen M. Baker and Chas. E. Baker employees of Locke Distributing Co. Poplar Bluff, Mo. admit to the following :
“Made false charge entries in accounts receivable ledger.
“Made false credit entries in A/C ledger.
“Have changed cash tickets to read as credit tickets. Have entered same in A/C ledger.
“Have used collections to cover shortages in stock.
“Have used company inventory to cover false charges.
“Have opened false charge accounts to cover inventory shortages.
“Have used funds from collected returned checks to cover false charges to customers and to help pay for merchandise shortage.
“We admit to all charges, shortages and inventory shortages attached to this statement and sign this statement of our own free will and without duress.”

Locke testified that during the evening of February 14, 1963, he called Mr. Popp of Popp & Springer and told him about having secured the confession and read it to him. He stated that Mr. Popp asked how much he thought the shortage was going to run, to which he replied, “ T don’t know, its getting sizeable. * * * we are not near finished. We are contacting each and every account and I think its going to run over $10,000.00, maybe more.’ ” Locke further testified that Popp replied, “ ‘Well, the extent of your bond is $10,000 * * * I hope it don’t run more than that.’ ” and told him to keep checking and when the final figure was ascertained they (Popp & Springer) would turn it over to the bonding company.

Fred C. Springer testified that about February 12, 1963, Mr. Locke called him on the telephone and told him that Helen Baker and Gene Baker had confessed to fraudulent and dishonest acts, and thought while in Mr. Locke’s office he saw the confession which Mr. Locke had read to him over the telephone; that after that Mr. Locke conferred with him either personally or over the telephone almost daily for two or three weeks.

Locke further testified that from February 14 to February 22, they continued to audit the accounts, during which time additional shortages were discovered; that the Bakers, at his request, agreed to sign another confession which he prepared and which they signed. Cecil Compton who was present at the time signed as a witness. This statement was offered as plaintiff’s Exhibit 9 by plaintiff and received in evidence over the objection that it was hearsay, and the further objection that the Bakers were in court under subpoena and available to testify with reference to the matters disclosed therein. Said exhibit reads as follows:

“Helen Baker and Chas. E. Baker make the following statement:
“We have just spent the money for our personal use and to help correct false tickets which we have made and etc. We admit that we have been short in our accounts and have taken money and stock from Locke Dist. Co. Poplar Bluff, Mo. starting about the last part of 1959 to the first part of 1960.
“We have worked together evenings after the route was completed to change and make false tickets on customers.
“We kept no record as to our shortages. We took money as we needed it for our personal use — making false tickets —false charges — false entries in accounts receivable ledger to cover the stock and money which we used.
“In late 1959 or early 1960 when we first started using Locke Dist. Co. funds we thought it would be a temporary thing which we could pay back, but it kept on growing until the present time and we lost all knowledge of whose accounts we had changed and made false entries, false charges and false credits or when we made all of the above shortages and etc.”

Locke testified that after obtaining the above confession, he talked to Fred Springer who told him, “ ‘Don’t worry, your bond is good and you’ll be paid. You can depend on $10,000.00. That is the limit of your bond. If it runs over that, I feel sorry for you, but you can depend on $10,000.00.’ ”

Gene Baker, while on the stand, admitted changing tickets from “paid” to “charge” stating he did this at Helen Baker’s request. Helen Baker, who was also a witness, admitted making the false entries in the ledger.

Locke testified he hired the firm of Hoche & Barklage, Certified Public Accountants, to make an audit to determine the shortage at the Poplar Bluff office and warehouse. Fred Carr, of that firm, actually did the work. He was contacted in reference to this employment during the second week in February, 1963. Mr. Carr testified he would not call it an audit, but accounting work that would be a part of an audit; that he did not do an audit to the extent of verifying the records from an outside source which would be the normal course in making an audit. He stated he examined copies of invoice type delivery and pickup tickets used to indicate merchandise delivered to the Poplar Bluff warehouse and the merchandise picked up at said warehouse; that he worked from the daily stock reports, which he said could be characterized as a running inventory type of report. He also examined the bank statements to determine the amount of money that had been deposited, the general ledger, general journal, special journal and the general records of Locke Distributing Company. All these records were furnished him by Mr. Locke. The period covered was from January 1, 1960 to February 12, 1963.

On cross-examination, Mr. Carr testified that certain of the records were not properly prepared; that he could not vouch for the correctness of the daily stock reports or the correctness of the delivery slips showing merchandise delivered to the Poplar Bluff warehouse, or the sales slips (tickets) showing merchandise sold or the slips showing bottles returned to the warehouse; that he did not know if these records mentioned were initially correctly prepared, and that he had to assume they were prepared on the dates shown on them.

Mr. Carr prepared a summary of the results of the so-called audit, a copy of which was marked as plaintiff’s Exhibit 15. The exhibit was offered, and received in evidence over the strenuous objection of defendant’s counsel. One of the objections was that Section 2 of the limitations of the bond, hereinbefore mentioned, rendered it immaterial and inadmissible. The exhibit showed an apparent shortage* of $10,969.82. This consisted of an inventory shortage of $7,159.52, and an accounts receivable shortage of $3,796.50. Another shortage was in the sum of $100.00 being the amount of two returned checks. From the total of these items was deducted the sum of $86.25 being cash submitted to the Cape Girardeau office on February 19, 1963.

Mr. Locke testified that Mr. Carr was furnished with sales tickets, deposit slips, daily reports, bank statements, cancelled checks, general ledgers, special ledgers and various records; that the matters furnished were books and records kept in a normal business manner in plaintiffs office and were a part of plaintiff’s regular records and books; that they were copies or the originals sent by Mrs. Baker to plaintiff’s office each day. However, plaintiff’s counsel stated the books and records obviously were not true and correct, but were falsified. Locke further stated it was sometimes three or four days before he received the daily stock reports from Poplar Bluff, and that he did not know when they were prepared; that the only records he could verify as correct were those showing the amounts of money deposited in the bank, because the bank sent him bank statements each month; that a part of the time, the deposits were made a day or days after the money was received. He did not know how or when the Bakers prepared the records on which the audit was based.

Charles E. Worthington was claims manager for the defendant in Cape Girardeau. At sometime after the discovery of the shortage and after Mr. Carr had completed his audit, Mr. Worthington met with Mr. Locke in the office of Hoche and Barklage. The exact date of this meeting is not disclosed by the evidence. Mr. Carr and Mr. Hoche were present at this meeting. Mr. Locke presented Mr. Worthington with carbon copies of the two confessions signed by the Bakers, and copies of the list of fraudulent accounts uncovered. Mr. Carr and Mr. Hoche gave Mr. Worthington the final audits made by Mr. Carr.

After this meeting and during the latter part of February 1963, Worthington went to Poplar Bluff and talked to the Bakers. At that time, he obtained a statement from the Bakers. This meeting was held in the office of the General Adjustment Bureau in Poplar Bluff. The statement, dated February 27, 1963, was in Gene Baker’s handwriting, except for the final paragraph thereof, which was written by Helen Baker. It was introduced in evidence by plaintiff without any objection by defendant. Said statement is in words and figures as follows:

“This is a statement concerning a shortage at the Locke Dist. Warehouse in Poplar Bluff. I understand that I am not required to make this statement, but I will, with the full knowledge that this statement can be used against us.
“My name is Charles E. Baker, age 41. We live at 1024 Henry St. Poplar Bluff, Mo. We have two children living with us and my wife’s mother. My wife’s name is Helen, her age is 39. This statement is a joint statement of me and my wife being written by myself. We have been employed by Locke Dist. Myself 12 years and approx. 7 or 8 years for my wife. I am employed as Route Salesman and my wife as bookkeeper. My duties were to make deliveries and sell Beer Cash and Credit. I had same stops and customers week from week. What I loaded on truck wasn’t counted or checked until recently when we counted Beer and kept Truck sheet. We had no idea of this beer shortage and can’t explain it of being this much. We thought when we left old Warehouse our stock was in OK condition and now almost 2 years later at new Warehouse we came up with this shortage. At new Warehouse we had Beer checked by Cape employ every Month. My wife’s duties were to take Daily Sales and report charges and credits along with cash sales and make daily deposits. We can’t exactly recall when or why we started taking these tickets and changing from Cash to Credit or the opposite. We didn’t make (sic) rec’d on Accounts when beer shortage was in warehouse. We made it up by falsely making cash tickets or credit. This shortage of stock we have no idea what caused it or how it came about. The trailors (sic) from Cape brought beer from Cape and St. Louis unloaded and left ticket of what they had delivered to us. We never checked this until recently. Sometimes my wife wasn’t even in Warehouse when this transaction was made. We Are Not Accusing Anyone or Anything. We had 2 break ins after moving to New location on Hiway 67 South. This was reported both times to local authorities.
“We did not to the best of our knowledge sell beer for Cash and pocket the money it was returned to Locke Dist. to make up violations of older tickets. In some cases we would sell Beer to Customers for Cash then change it in local office to a Charge and send in to Cape office then use Money to clear some other ticket which was due or a violation. All the Money that we took and used for Ourselves is now on ledger. The Waitress that ran Arthur Eastwood place at Wappopello Lake her name is June owes that ticket and she told me Arthur had OK for her to buy beer on Credit and I sold her which she has promised to pay the rest of tickets we do not question. Arthur Eastwood Wappopello, Mo. #83017-84929 Total of $61.95. Also since checking trailor (sic) loads of beer coming into Warehouse we have found errors on tickets which were Changed.
“We owe:
“To bank of Poplar Bluff on House $4660.00 personal loan there $275.00. To State Bank on car $1537.22 61 Pontiac Starchief. Superior Loan on Refrigerator around $400. Public Loan $800. on furniture. A few years ago Bank of Poplar Bluff appraised House for $12000. since then we added room on enclosed Carport and added overhead Carport on driveway which should bring value of property higher.
“The above statement of 2¼ pages has ibeen written by my hand and is a statement covering our activities with Locke Dist. Co. This statement is given freely and voluntary and is true and Correct to the best of our knowledge.
(Signed) Charles E. Baker
“I, Helen Baker have read the above statement of 2⅛ pages written by my husband Charles E. Baker. This statement with most of my help is true and correct to the best of my knowledge.
(Signed) Helen Baker
Witness: (Signed) C. E. Worthington”

In April 1963, defendant employed the firm of Diggs & Anders to make an audit of the company’s business at Poplar Bluff. The audit was made during the latter part of April or first part of May. Most of the work was done by Mr. Minkler of that firm. Mr. Anders assisted him in lining up the work and reviewing his papers. Anders also helped Minkler write his report. During the course of the work, plaintiff and Hoche & Barklage furnished all records, ledgers and work sheets that were requested of them. The result of the audit was the disclosure of shortages in the same amounts as found by Mr. Carr and reported in his summary hereinbefore described. A detailed report of this audit was sent to defendant June 27, 1963.

On July 23, 1963, Mr. Worthington sent the following letter to Mr. Locke:

“Dear Mr. Locke:
“This will confirm our telephone conversation of July 15, 1963.
“As I stated at that time, we will accept the accounts receivable shortage of $3796.50. The information submitted by you is not sufficient to prove the inventory shortage of $7159.57 is traceable to the dishonesty of Helen and Charles E. Baker. Before this amount can be considered, we need some proof it was caused by the dishonesty of the Baker’s and did not arise from errors in bookkeeping or from some other common inventory errors.
“We should be furnished with the dates that physical inventories were taken and by whom. Did these physical inventories agree with the book inventory? What has been your experience at your other locations with the correctness of book inventory compared to physical inventory? Are there normal inventory errors at all your locations?
“In addition, there is no indication the Bakers have been tied into the inventory shortage by specific dates and times. Upon receipt of this information, it will be given consideration in connection with the inventory loss.
“As stated previously with the information we now have, the only amount directly traceable to the dishonesty of Helen and Charles E. Baker is the vari-fied accounts receivable shortage of $3796.50.”

Helen Baker was called as a witness by plaintiff. On direct examination she testified as follows:

“Q. Now, Mrs. Baker throughout these statements (Plaintiffs Exhibits 8 & 9), you mentioned that you have used company inventory, and I won’t go into all the details, but there are no amounts contained in either statement, I’ll ask you if you will tell the jury, please, ma’am, the total amount that you and Mr. Baker appropriated in accordance with these two statements ?
“A. Just what was on the ledger. * * Offhand, I don’t know what it was. * * I didn’t keep any records whatsoever.”

At this point, plaintiff’s counsel asked permission to cross-examine Mrs. Baker as a hostile witness claiming surprise and stating as grounds therefor that her testimony was inconsistent with that given by her in a deposition taken October 24, 1964, prior to the trial. This permission was granted by the Court.

Plaintiff’s counsel then read to the witness the following questions from the deposition which he stated had been asked her by defendant’s counsel, and her answers thereto: “ ‘Q. What would be your estimate of the amount of beer that you and your husband took ?’ ” Her answer was, “ ‘Well I imagine it was around over Ten Thousand with the money and all, I guess. Q. That you took that much? A. I imagine. * * * Q. * * * could you break down how much money you took from the accounts receivable? A. I believe it come to around forty-nine hundred or four thousand or five thousand, I mean or something like that. Q. Are you saying then that you took $5,000.00 worth of beer also ? A. Well, I don’t know. It all amounted up to over $10,000.00.’ ”

The witness admitted that the foregoing questions were asked and that she gave the above answers to said questions. But she explained, “Sir, what I went by was the inventory they took that was showed to us.”

The transcript then reveals the following:

“Q. * * * Now, do you remember this question being asked you? ‘Now, are you saying $10,000.00 because you have been told that that was the amount of the shortage?’ and your answer was ‘No, nobody told me that.’
‘Q. How did you come up with $10,000.00?
‘A. Well, our first audit out there in April in the books, with the bonding company and ours both, showed that.
‘Q. That is what somebody is telling you? A. No, sir, they are not. Q. (By Mr. Grimm) Well, I am asking you for your own recollection of how much you say that you took? A. Well, it is about ten thousand. Q. And on what are you basing that, Mrs. Baker? A. Well, over the period of years that the beer that was missing in stock, I imagine.’ ”

In answer to counsel’s question, whether she remembered the foregoing questions and the answers given by her, the witness replied, “Yes, sir.”

There then appears the following:

“Q. And now, Mrs. Baker * * * do you remember Mr. Grimm (Defendant’s Counsel) asking you this question ? ‘Have you understood the questions that I have asked you, or have I changed them sufficiently so that you could understand them?’ You answered, ‘Yes, sir.’ ‘Q. Are there any answers that you have given that you would like to change at this time? * * * A. Not that I remember. Q. * * * Have all the answers that you have given been true and correct, to the best of your knowledge ? A. * * Yes, sir.’ ”

The witness answered that she recalled the foregoing questions and answers.

Mrs. Baker at the trial was then asked the following questions:

“Q. All right. Now Mrs. Baker, I’ll ask you again if you can tell this Court and jury the total amount that you and your husband appropriated during the time that you were working for Mr. Locke in dollars and cents?” The witness replied, “Well, I don’t know.”

On cross-examination, Mrs. Baker gave the following testimony:

“Q. Did your husband, to your knowledge, or did you, take any beer and sell it and not report it on the slips, these daily slips, that were sent to Cape Girardeau? A. Not that I remember. Q. In other words, you are saying that the only money that you took from Locke Distributing Company was the adjustment of the accounts receivable, is that correct? A. Yes, sir. * * * Q. * * * Do you have any knowledge of this loss other than what you have been told about it by Mr. Locke or Mr. Knehans or Mr. Rader or myself (Grimm) as to the amount of it? A. No, sir. We went through the books but I didn’t see that whole amount whenever it was added up from the ledger. * * * Q. In your deposition that Mr. Knehans has previously read to you, you testified that the loss was over $10,000.00, where did you get this idea? A. Well, from the books or the original ones. Q. And who showed that to you ? A. Well, the bonding company had one and also Mr. Locke showed us that. That’s the reason I said it was over ten. Q. But this was because of what had been shown to you and not what you knew yourself, is that correct? A. Yes, sir. * * * Q. Mrs. Baker, do you know how they arrived at this figure of $10,000.00 of your own knowledge? A. One thing, just what was on the ledger, the ticket that was altered on the ledger. Q. Do you know, of your own knowledge, how this figure was arrived at, other than these accounts receivable that we previously talked about? A. Through stock report, I imagine. Q. But you have no knowledge yourself, is that correct ? A. Well, there was an audit of it. Q. I’m talking about your own knowledge of what you know about the figures ? ' A. No, sir.”

On redirect examination, Mrs. Baker testified as follows:

“Q. (By Mr. Knehans) That isn’t what you told Mr. Grimm when your deposition was taken, that you were basing the $10,000.00 figure on any audit? You didn’t tell him that then, did you ? A. Well, I don’t remember. Q. Well, to refresh your recollection, let me ask you again, page 34, do you recall Mr. Grimm’s question? (Reading) ‘Q. Are you saying that you took $5,000.00 worth of beer also? A. Well, I don’t know. It all amounted up to over $10,000.00.’ Then Mr. Grimm said, ‘Now, are you saying $10,000.00 because you have been told that that was the amount of the shortage?’ And your answer was, ‘No, nobody told me that.’ You remember those questions and answers? A. Yes, sir. Q. Were those answers that you gave correct? A. I hope they were.”

On recross-examination, Mrs. Baker testified she did not help make the audit or check any of the figures on it. She then gave the following testimony:

“Q. Well, then, if you didn’t prepare the audit and you didn’t help get it, where in the world did you get this $10,000.00 figure unless somebody told you that’s what it was ? A. What I was going by is that the first one was over $10,000.00. Q. But its what somebody told you on that audit, isn’t it? A. Well, I think both of them had it. Q. Did you yourself prepare any figures or have any knowledge — ? A. Me and Mr. Locke went through the books to see on our ledger who owed. Q. This is the accounts receivable? A. That’s right. Q. Now, then, did you have anything else to do with any other part other than the accounts receivable? A. No. Q. And so that the only shortage that you know about is the accounts receivable shortage? A. In the ledger.”

Before plaintiff’s deposition was taken, Locke called Mrs. Baker and her husband and told them he would like to see them at the warehouse. They went to the warehouse in response to this request. Mr. Locke and his attorney were there when they arrived. Mr. Locke showed them an amount, and told them the bonding company was only allowing ten thousand but the audit showed more than ten thousand.

Mr. Baker, defendant’s witness, testified that at this meeting they were told about this lawsuit, and that Mr. Knehans kept repeating that it (loss) was over ten thousand dollars, and “ * * * he wondered if we couldn’t testify to that, so that Mr. Locke could get his Ten Thousand Dollars * * * he said he would keep in touch with us and for us to think about it and he would see us later.”

The transcript shows the following testimony given by Mr. Baker in cross-examination :

“Q. As a matter of fact, what I (Kne-hans) told you was, isn’t this true, Mr. Baker, that the auditor employed by Hartford, as well as Mr. Locke’s auditor, both computed the shortage at over Ten Thousand Dollars, isn’t that what I told you? A. It might have been. Q. Now, I didn’t ask you to testify to anything that was either false or that you didn’t know, did I ? A. You didn’t just come out and say that I had to, but you asked me, you said, the best I understand it, that you kept repeating it, that we would have to, that you’d like for us to, to testify. Q. As a matter of fact, isn’t this what I said, both to you and to Mrs. Baker, that, ‘If you can arrive at the amount of what you two have taken, that’s what we want you to testify to,’ isn’t that what I told you? A. Yes, you said that.”

Beer was delivered to the Poplar Bluff warehouse in trailer trucks. The truck driver, when delivering a load of beer, carries with him a key to the warehouse. He is thus able to unlock the warehouse and leave the beer if no one else is present. Mr. Locke testified it was very seldom that Mrs. Baker, who worked five days a week, was -not present to perform her duty to count the beer as it was taken off the truck. If the beer was delivered on Saturday, the truck driver could unlock the warehouse, leave the beer and make out a ticket. He further stated that on such occasions, “ * * maybe Baker would come in, he might be on a delivery at the time, he works until Saturday noon, or did work until Saturday noon.

Gene Baker testified that the only shortage he participated in was the cash receipts from the beer tickets. He stated, “ * * * I don’t know what happened to the beer shortage, I don’t think anyone else knows.”

Defendant contends that the trial court erred in overruling its objection to the testimony of Fred Carr with reference to the results of his examination of defendant’s books and records. The basis of the objection was that by the terms of the bond, such testimony was inadmissible because based upon an inventory computation.

It is clear from a review of Mr. Carr’s testimony that the existence and amount of the beer shortage at the Poplar Bluff warehouse was ascertained by him by inventory computation. The bond specifically provides that the bond does not cover any loss, or part of a loss, proof of which either as to its factual existence or as to its amount is dependent upon an inventory computation. It therefore follows that neither Carr’s audit nor testimony of the results of the audit, insofar as it related to the beer shortage was competent evidence to establish liability under the bond for such shortage, unless the points urged by plaintiff in support of the court’s ruling have merit. We will next consider said points.

Plaintiff contends there was sufficient substantial evidence independent of inventory computation to establish the fact of loss of property through fraudulent and dishonest acts of the Bakers, which proof rendered admissible the inventory computations to establish the amount thereof. Plaintiff cites the case of Tri-Motors Sales, Inc. v. Travelers Indemnity Company, 19 Wis.2d 99, 119 N.W.2d 327. In that case the Wisconsin Supreme Court, in construing a provision identical with the one here in question, held that once a plaintiff (Insured) has proved by independent evidence that the employee did steal property, the prohibition against the use of inventory computations is rendered inoperative, and the amount of such loss may be proved by inventory computations. In reaching this result, the court first found that the wording of the proviso rendered the exclusionary provision ambiguous, then reached the result it did by application of the rule that all ambiguities should be resolved against the insurer. We cannot agree with the opinion for the reason we find no such ambiguity in said provision. The words “as to its amount” appearing in the absolute prohibition was clearly intended to be carried over into the proviso, to prohibit the use of inventory computation in proof of the amount of the loss even though there be independent evidence of the act of stealing. The only effect of the proviso is to render inventory computations admissible as corroborative evidence, after proof of the misappropriation and the amount thereof by evidence independent of inventory computation.

In passing, we deem it appropriate to point out that there is no merit to plaintiff’s contention that the fact of dishonest appropriation of beer was established by the confessions obtained from them by Mr. Locke (Plaintiff’s Exhibits 8 & 9). The confessions were not admissible as original evidence to prove the issue of liability on the bond, and cannot be considered here as substantial evidence of the facts therein related in proof of the alleged defaults. The rule which excludes hearsay as evidence applies to written, as well as oral statements, 31A C.J.S. Evidence § 194, p. 547. Hussey v. Robison, Mo., 285 S.W.2d 603; State ex rel. Thompson v. Harris, 355 Mo. 176, 195 S.W.2d 645, 166 A.L.R. 1425.

Plaintiff is also in error in stating that both Mr. and Mrs. Baker, in their testimony at the trial, admitted the theft of beer. An examination of the transcript reveals that they only admitted taking money, the amount of which was established by proof independent of inventory computation, to be $3,796.52. Both denied stealing from the beer stock.

It is further contended that the testimony of Helen Baker, in the deposition used at the trial for impeachment purposes, constitutes sufficient evidence that the loss, including money and beer amounted to over $10,000.00. Obviously, this testimony cannot, when considered as a whole be held to be competent proof of the amount of the beer loss wholly apart from inventory computation.

While it is true that in said deposition, Mrs. Baker said she imagined and guessed that the total amount of the shortage was over $10,000.00, it is apparent that such knowledge and belief was based on what was revealed by the audits. This is made clear by the following question and answer read to her at. the time from the deposition: “'Q. How did you come up with $10,000.00? A. Well, our first audit out there in April in the books, with the-bonding company and ours both, showed that.’ ” Mrs. Baker was, in effect, merely testifying to the total amount shown in the audits, and giving testimony based upon un-sworn statements of other persons. In making the audits, the beer shortage as well as the amount thereof, was arrived at by the process of inventory computation. Under the terms of the bond, a loss established in this manner, either as to its existence or amount, is beyond the coverage of the bond. It therefore follows that such audit or testimony of the results of such an audit is not competent evidence to establish the amount of liability under said bond. Furthermore a witness should not be permitted to testify to facts where his knowledge thereof is derived from unsworn statements of others. 31A C.J.S. Evidence § 200, p. 568; Lavender v. Kurn, 355 Mo. 168, 195 S.W.2d 460. Testimony based upon hearsay is inadmissible. St. Louis Union Trust Co. v. Little, 320 Mo. 1058, 10 S. W.2d 47.

In the alternative, plaintiff contends that defendant, by its acts and conduct, waived the exclusionary provision in question by putting plaintiff to considerable expense and difficulty in connection with inventory computation.

Plaintiff apparently is trying to invoke the doctrine announced in many insurance decisions in this state that where the insurer, in any negotiations or transactions with insured, after knowledge of facts which would work a forfeiture, requires the insured to do some act or acts, incurring trouble or expense, the right to insist upon a forfeiture will be deemed waived. It is doubtful that this doctrine has application to the case at bar, because the question here is not one of forfeiture but of coverage. One cannot create coverage by waiver or estoppel. Rowland v. Missouri State Life Ins. Co., Mo.App., 48 S.W.2d 31; Berry v. Massachusetts Bonding & Ins. Co., 203 Mo.App. 459, 221 S.W. 748; Fernan v. Prudential Ins. Co. of America, Mo.App., 162 S.W.2d 281; Shepard v. Metropolitan Life Ins. Co., 231 Mo.App. 148, 99 S.W.2d 144; Rosenberg v. General Accident Fire & Life Assur. Co., Mo.App., 246 S.W. 1009.

But assuming that since the policy covered loss of property as well as cash and merely restricted the method of proof which could be the subject of waiver, there is no basis for its application in the instant case. The evidence upon which plaintiff relies as establishing implied waiver relates to requests and acts after the claim was made ■ and before suit and also certain acts after suit was filed. Those which occurred prior to the beginning of the action are as follows: (a) The request for information contained in the letter dated July 23, 1963, (Plaintiff’s Exhibit 10, heretofore set out) sent to plaintiff by defendant’s claims attorney, (b) Examination by defendant’s auditors of plaintiff’s books and records and work sheets of plaintiff’s auditors, which material was made available to defendant’s auditors by plaintiff’s auditors. (c) Production by plaintiff at defendant’s request, all of its receiving slips, books and records, general ledger, daily reports and ledger sheets, (d) Putting plaintiff to the trouble and expense of having its auditors meet with defendant’s auditors at which meeting there was an examination of plaintiff’s tickets, daily reports, bank statements, general and' special ledger, books and records, as well as the computations of plaintiff’s auditors.

The bond provides (Section 7) as follows :

* * ⅝ * * ⅝
“Upon the Underwriters request, the-Insured shall produce for the Underwriter’s examination all pertinent records, at such reasonable times and places as. the Underwriter shall designate, and shall cooperate with the Underwriter in all matters pertaining to loss or claims with respect thereto.”

In making the above mentioned requests, defendant was exercising a right given it by the bond. Likewise, in complying with defendant’s requests, plaintiff was performing a duty imposed upon it by the terms of the contract. The matter called for and produced was pertinent to the investigation of the claim and to a proper' evaluation of it. Under such circumstance, no waiver or estoppel could arise with reference to the application of Section 2 of said bond, by reason of the above mentioned requests and acts of the defendant. To so hold would unduly burden an insurer in its investigations of claims, and in effect, deprive it of rights stipulated for under the bond, and the right to adequately prepare its defense against the theory plaintiff was asserting. Furthermore, there was no showing that at the time of the said acts and requests, defendant had knowledge that plaintiff intended to rely solely upon inventory computations in proof of its loss.

Plaintiff further contends that defendant is estopped from relying on Section 2 of the bond by a letter dated June 20, 1963, addressed by defendant’s St. Louis claims manager to defendant’s Cape Girar-deau agent, which letter stated in part as follows ;“***! would like to disabuse your mind of any thoughts that Mr. Worthington (Claims Attorney) or the Hartford had been delaying action in the handling of this claim. It was purely a case of two (2) concerns of CPA’s not being able to agree on the amount of the loss involved.” It is not shown that the contents of this letter were ever communicated to plaintiff, or that plaintiff’s position was changed to its detriment by reason thereof. In our opinion, this communication between two employees of defendant made during the processing of plaintiff’s claim, cannot be said to establish waiver of the provisions of Section 2 of the bond, or to estop defendant from relying on said provision.

Finally it is urged that defendant waived the provisions of Section 2 by certain acts after suit was filed. These are stated to be: “(1) After the filing of suit, the defendant submitted to plaintiff a set of twenty-six interrogatories, fourteen of which were directly concerned with inventory and inventory computations. (2) Defendant took the depositions of Locke, Carr and Hoche on two different days requiring five or six hours at substantial expense to plaintiff. Most of the questions propounded to Carr and to Hoche concerned inventory and their inventory computations.”

Neither the interrogatories nor the depositions referred to appear in the transcript. They were not lodged in this court. In fact the transcript fails to show their introduction into evidence. But be that as it may, we do not believe the action of defendant in seeking information that might be helpful in its defense or lead to the discovery of such evidence, which procedures our code permits, should be considered evidence of waiver or estoppel.

In our opinion, there was no evidentiary basis for a finding of an implied waiver, as plaintiff contends. Nor was there a showing of any direct act in the nature of a waiver, or promise, indicating an intent to waive, based upon a consideration. To establish such a waiver where a substantial right is involved, both knowledge and consideration must be present. It is only where an implied waiver is relied upon which contains elements of estoppel that proof of consideration need not be shown. Fairbanks, Morse & Co. v. Baskett, 98 Mo.App. 53, 71 S.W. 1113.

Carr’s testimony as to what his examination and audit revealed with reference to the beer shortage was not competent on proof of liability under the bond for the alleged beer loss. Mid-Continent Stores, Inc. v. Central Surety & Ins. Corp., Mo.App., 377 S.W.2d 567.

Complaint is made of Instructions 2 and 4. Instruction No. 2 was a verdict directing instruction, and Instruction No. 4 was on the measure of damages. Neither instruction is set out in the argument portion of appellant’s brief as required by Civil Rule 83.05(a), V.A.M.R.

Instruction No. 2 directed a verdict for plaintiff if the jury found, among other facts, that “plaintiff sustained a loss of money or other property through any fraudulent or dishonest act or acts of Helen Baker or Charles E. Baker while in the employ of plaintiff during said period.” This instruction, while in the words of the bond, does not give the jury any guide to determine what are fraudulent acts or limit them to a consideration of matters actually covered by the bond, that is, the intentional appropriation of money and property to their own use. It might well be that the jury, unlearned in the law, might consider acts of mere negligence, such as failure to be present and check beer being unloaded by truck drivers on Saturday mornings and before working hours at the plant, as fraudulent acts. Mere negligence or carelessness will not be sufficient to impose liability under the bond. The language of the bond implies positive acts of wrongdoing of a dishonest nature. The instruction also permits consideration by them of shortages disclosed by inventory computations thus permitting recovery upon evidence which merely shows that property covered by the bond was missing. On account of the method of doing business, the proof of the inventory shortage was not sufficient basis for establishing the fact of recoverable loss due to fraudulent acts of the Bakers. Such a finding would rest on speculation and conjecture. Instruction No. 4 is erroneous for the same reason.

On retrial, both instructions can be more carefully drawn so as not to give the jury a roving commission to determine matters of law, which is properly the duty of the court.

We find no merit in defendant’s point that all of the testimony of witness Carr, pertaining to the results of his examination of plaintiff’s books and records, was inadmissible because said books and records were not identified as business records under The Uniform Business Records as Evidence Law (Sections 490.660 to 490.690, RSMo.1959, V.A.M.S.,) and for the reason they were not correctly and accurately prepared. The books and records were identified by Mr. Locke as those of the company kept in the normal operation of the business. It was admitted by plaintiff’s counsel that some of the ledger entries were inaccurate because they had been falsified by Helen Baker. The same is true of the daily reports. It also appears that sales slips were falsified by Gene Baker to show a credit sale when cash was actually collected. The falsifications were with reference to money embezzled by the Bakers. Plaintiff is not relying upon the verity of items appearing in the books and records to effect a recovery, but has made use thereof, together with the testimony of Walter Buchheit concerning his check with the customers shown on the ledger, to prove the amount of money stolen by the Bakers. There is no contention that the list of customers shown was in any way falsified. The records, though inaccurate as to the amounts shown to be due did not render the testimony of Carr with reference to the results of his audit inadmissible in the proof of the money shortage. What we have said also applies to plaintiff’s Exhibit 15. So much thereof as pertained to the money shortage was admissible. Linnell v. London & Lancashire Indemnity Co., 74 N.D. 379, 22 N.W.2d 203.

Finally it is urged that the Court erred in submitting to the jury the issue of vexatious refusal to pay. We think it apparent that on the facts presented in the record, the court erred in this respect. We deem further discussion of the matter wholly unnecessary.

The judgment is reversed and the cause is remanded.

WOLFE, P. J., and RUDDY, J., concur.


source: Caselaw Access Project

author: MOREMEN, Chief Justice.

license: Public Domain

text:
    COMMONWEALTH of Kentucky, DEPARTMENT OF HIGHWAYS, Appellant, v. William E. WILLIAMS et al., Appellee.
    Court of Appeals of Kentucky.
    March 11, 1966.
    Rehearing Denied Nov. 18, 1966.
    Robert Matthews, Atty. Gen., H. C. Smith, C. E. Skidmore, Dept, of Highways, for appellant.
    Adrian H. Terrell, Terrell, Schultzman & Hardy, Paducah, for appellee.
   MOREMEN, Chief Justice.

This is the second appearance of this case on our docket. On the former appeal, Commonwealth Dept, of Highways v. Williams, Ky., 383 S.W.2d 687, the judgment was reversed on the ground that the evidence lacked sufficient probative value to support the verdict which awarded $11,920 for 9.52 acres of a 526 acre tract. On the second trial the quality of proof introduced by the landowner was greatly improved and, upon submission, the jury returned a verdict in the amount of $13,155. On this appeal the Commonwealth again contends that the evidence does not have sufficient probative value to sustain the verdict.

The land lies on the northerly side of Barkley Lake at a point not far from the place where the old channel of Cumberland River swept close to Kentucky Lake and near the connecting canal between Kentucky Lake and Barkley Lake. It lies immediately north of a vast tract known as “Land Between The Lakes,” which will be developed by governmental authorities as a recreational area. About six miles west are Kentucky Dam and Kentucky Dam Village State Park.

At the trial the witnesses did not attempt, as they did on the former trial, to divide the 526 acre tract into two tracts and assign separate values on an acreage basis. On this trial the witnesses valued the property as a unit and here is the tabulation of the values set by witnesses for the landowner:

Before Value After Difference
Williams $263,000 $248,000 $15,000
Riley 263,000 245,000 18,000
Robertson 263,000 247,240 15,760

Only one witness was introduced for the Commonwealth and he gave the following values:

$ 40,500 $ 37,650 $ 2,850

The witnesses for the landowner were thoroughly familiar with the property and the problems created because of the cut and fill construction of the road which traversed the property; the land was rolling and because of the construction about 200 feet on each side of the road were unusable. The witnesses testified as to comparable sales in the community where land had been sold for $500; $572; $420; $4,666; and $2,222 per acre.

The witness for the Commonwealth also testified as to the comparative sale price of two other tracts of lesser value per acre, but the evidentiary effect of this testimony was somewhat weakened by evidence introduced by the landowner to the effect that the sales were not voluntary.

In the circumstances brought out by the evidence on this trial, it is readily apparent why the jury placed a higher figure upon the value of the land than that placed by the witness for the Commonwealth.

Judgment affirmed.

Judges Montgomery and Hill dissenting.


author: DAVIS, Commissioner.

text:
    Luvenia JOHNSON, Individually, etc., et al., Appellants, v. Bart N. PEAK et al., etc., Appellees.
    Court of Appeals of Kentucky.
    June 24, 1966.
    Rehearing Denied Nov. 23, 1966.
    Weldon Shouse, Lexington, for appellants.
    Robert Matthews, Atty. Gen., Frankfort, Armand Angelucci, County Atty., for Fay-ette County, Robert F. Stephens, Asst. County Atty., Lexington, for appellees.
   DAVIS, Commissioner.

Appellant, a resident taxpayer of Lexington, suing for herself and others similarly situated, attacks the validity of KRS 67.320 (county fire-department statute) as violative of Sections 141, 59, 60 and 171 of the Kentucky Constitution. The trial court entered judgment sustaining the statute’s validity, and this appeal challenges the propriety of that judgment.

KRS 67.320 provides, so far as here pertinent:

“(1) The fiscal court of any county within this Commonwealth may maintain a fire department for the purpose of protecting the property of the county and citizens thereof who reside outside any municipality wherein a fire department is being maintained.”

The claim that the quoted statute violates Section 141 of our constitution is premised on the erroneous argument that the jurisdiction of the “county” court is involved. Patently the statute deals only with the “fiscal” court; Section 141 of Kentucky’s constitution has no application at all to this situation. Metcalf v. Howard, 304 Ky. 498, 201 S.W.2d 197, 201.

Equally without merit are the claims that the statute runs afoul of Sections 59 and 60 of the Kentucky Constitution. The basis for the assertion that the statute is proscribed by the cited constitutional sections is appellant’s misconception that the statute is “special legislation.” This argument for appellant assumes that KRS 67.320 limits the counties which may provide a fire department to those having a municipality which maintains a fire department. But that is not the proper construction of the statute. Plainly the statute is a general one authorizing any county in this state to have a fire department. It sensibly directs that duplication of services shall be avoided in those instances in which a municipally maintained fire department exists.

Finally, the appellant urges that inasmuch as she and others similarly situated are resident taxpayers of Lexington, a substantial portion of the county taxes paid by them finds its way into the coffers of the county fire department which renders them no service. This, appellant says, violates Section 171 of the Kentucky Constitution, because taxes must be levied and collected for public purposes only. The argument is untenable. In the first place, the statute provides that the county fire protection shall be “ * * * for the purpose of protecting the property of the county * * Such property would include the court house and jail, within the corporate limits of Lexington. Moreover,, the citizens of Lexington have a vital' interest in the suppression of fires originating in the heavily built-up suburban areas abutting hard on the city’s borders. These are “public purposes” within the meaning; of Section 171.

The judgment is affirmed.


author: CLAY, Commissioner.

text:
    Mary Frances LYON, Administratrix of the-Estate of Jewell D. Lyon, Deceased, Appellant, v. Dewey WOOD and John P. Glenn, Appellees.
    Court of Appeals of Kentucky.
    June 10, 1966.
    As Modified on Denial of Rehearing Nov. 4, 1966.

      G. D. Milliken, Jr., Milliken & Milliken, Bowling Green, for appellant.
    G. Sam Milam, Russellville, for appellee, John P. Glenn.
    Donan & Vick, Greenville, Jesse L. Riley, Jr., Russellville, for appellee, Dewey Wood.
   CLAY, Commissioner.

In this action against two doctor defendants for malpractice the trial court directed a verdict for both of them at the close of plaintiff appellant’s evidence. Our only question on appeal is whether the plaintiff was entitled’to have the issue of negligence submitted to the jury.

Plaintiff’s husband was stricken with appendicitis on the night of August 18, 1963. On admission to the hospital he was attended by defendant Wood. The next day defendant Glenn, a surgeon, was called in and performed an appendectomy. No negligence was shown in the performance of this operation.

However, an unusual condition was discovered. Instead of the appendix being in the normal position in the right lower portion of the abdomen, it was found in the left upper part of the stomach. This condition apparently contributed to a development which was to prove fatal. Somehow the patient’s intestines became twisted, gangrene set in, and he died three days after a second operation by another doctor.

There was testimony that after the appendectomy the patient suffered extreme pain and his stomach was appreciably swollen. The- evidence would permit a fair inference that his postoperative condition progressively deteriorated. He was, however, discharged a week after the operation. His condition worsened the night following his discharge, and he was sent back to the hospital the following day. Three days later Dr. Harris operated and found a condition he could not cure.

The two principal items of negligence upon which the plaintiff relied were (1) the failure of the doctors to ascertain and to care for the patient’s worsening condition, and (2) discharging the patient when he was seriously ill.

Dr. Harris testified in substance that the location of the appendix should have aroused suspicion that the intestines might be involved; that in view of the patient’s worsening condition X-rays should have been made; and that he should not have been discharged from the hospital. He also testified that by the exercise of proper care and skill the patient’s life could have been saved.

We cannot find in this record any substantial evidence that defendant Wood was negligent, and the trial court properly directed a verdict for him. In our opinion there was sufficient evidence to present a jury issue as to defendant Glenn’s negligence.

This defendant attacks the qualifications and competency of Dr. Harris as an expert witness, principally on the ground that he could not and did not testify with respect to the usual standards of care followed in the hospital where the patient was treated. Yet his testimony shows that his opinions about proper procedures were based upon what he believed to be fair standards of due care in the community where these medical services were performed. His opinion, favorable to defendant Wood, was specifically founded upon such consideration. In addition, the proper procedures he outlined would appear to be those generally accepted.

We certainly do not say that plaintiff conclusively proved defendant Glenn negligent, or that the latter may not have a good defense. When we consider, however, that the patient’s first operation disclosed an unusual situation; that his condition apparently deteriorated; that he was treated as an ordinary patient when there may have been reason to treat him otherwise; that the cause of his death was traceable to developments which had their inception after the first operation; and the opinion testimony with respect to lack of due care, there was evidence of substance which would justify a finding of negligence by a jury. Under these circumstances a verdict was improperly directed for defendant Glenn at the conclusion of the plaintiff’s evidence.

The judgment is affirmed as to defendant Wood and reversed as to defendant Glenn, with directions to grant plaintiff a new trial.


author: PALMORE, Chief Justice.

text:
    William COWAN (William D. Cowen), Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Court of Appeals of Kentucky.
    Oct. 28, 1966.

      Walter B. Smith, Shelbyville, for appellant.
    Robert Matthews, Atty. Gen., Harold T. Hotopp, Asst. Atty. Gen., for appellee.
   PALMORE, Chief Justice.

The appellant, William David (Willie) Cowen, was indicted for murder with two previous felony convictions. He appeals from a judgment entered pursuant to a verdict finding him guilty of involuntary manslaughter and prescribing a sentence of' 12 years in prison. KRS 435.022(1).

The evidence presented a substantial case of self-defense, and the first question before us on the appeal is whether Willie was entitled to a directed verdict on that basis.

The fatal event took place near the corner of 10th and Union Streets in Shelbyville. 10th Street runs north and south and Union Street intersects it from the west. A place of business called the Rendezvous Club fronts on 10th Street at the southwest corner, and a barber shop was located across Union Street at the northwest corner. The decedent, Jesse Shouse, a large and powerful man, was one of several persons present on the barber shop corner when Willie Cowen emerged from the Rendezvous and started to go around to his car, which was parked on the south side of Union Street. Upon seeing Willie, Shouse ■immediately walked across Union Street and accosted him. After a brief conversation Shouse struck Willie on the face or head with his fist and knocked him to his knees. Willie attempted to scramble away and retreated across to the east side of 10th Street with Shouse in hot pursuit. Willie then drew a pistol from his coat pocket and fired it twice in close sequence. The second shot hit Shouse in the midsection, and he later died from its effects.

Willie testified that he fired the first shot as a warning, missing on purpose. He did not issue a spoken warning. At the moment of the second shot the two men were, according to various estimates, between 3½ and 10 feet apart, facing each other. Some witnesses said Shouse stopped when the first shot was fired, while others, including Willie, said he continued to advance. Shouse was not armed.

The rapid succession in which the two shots were fired is a circumstance from which a jury might reasonably infer (1) that the first shot was not intended as a warning and (2) that it did not in fact accomplish the purpose of a reasonable warning in that Shouse was not given any time to respond to it. Granting the extreme closeness of the case, nevertheless we are of the opinion that the evidence does not establish as a matter of law that the apparent necessity (to Willie) of shooting Shouse was reasonable. See Martin v. Commonwealth, Ky., 406 S.W.2d 843 (decided October 7, 1966).

Obviously in an effort to insure infliction of a life penalty in the event Willie should be found guilty of culpable homicide in a lesser degree than murder, the grand jury charged two previous felony convictions, one in 1949 for driving a car without the owner’s consent (KRS 433.220) and the other in 1952 for carrying concealed a deadly weapon (KRS 435.230). These were proved in chief through the circuit court clerk and county attorney. Then, after Willie had taken the witness chair in his own defense and had been cross-examined, the Commonwealth’s Attorney renewed the interrogation for “Just one question. Tell this jury whether or not you have ever been convicted of a felony.” An objection was overruled, and over further remonstrances the prosecution was permitted to extend its “one question” into an examination that covers four pages of the transcript and consisted entirely of obtaining confirmation of the two convictions theretofore proved and admission of two others, together with the respective sentences imposed in the various instances. At the end, the trial court admonished the jury that proof of the prior convictions could be considered only as affecting the witness’s credibility.

It is a procedural rule of evidence that a witness, including a defendant who testifies for himself in a criminal case, may be impeached by proof that he has been convicted of felony. CR 43.07, formerly Civil Code § 597; RCr 13.04. Because the rule expressly allows it to be accomplished by introduction of the record, this court always has conceded the Commonwealth’s right to elicit from the witness such details as would be disclosed by the record of conviction if it were introduced. Cf. Hannah v. Commonwealth, 220 Ky. 368, 295 S.W. 159, 160 (1927). This is the technical theory through which the prosecution is able to escape being confined to a mere showing that the witness has been convicted of a felony, without further elaboration.

Recognizing that no admonition can really assuage the prejudice that is done to a defendant on the merits of his case by disclosure of past felonies in the name of impugning his credibility, we are gravely troubled by the great latitude with which this courtroom device has come to be used in criminal trials. It is unnecessary and it is unfair. In this particular instance there is a reasonable probability that it was a factor in the paradoxical verdict finding Willie Cowen guilty of involuntary manslaughter. As in Martin v. Commonwealth, Ky., 406 S.W.2d 843 (decided October 7, 1966), it is clear that in deliberately rejecting all the theories of voluntary homicide (including self-defense) the jury resolved the case on a basis that finds no support whatever in the evidence.

Cowen made no attempt to suggest he did not intend to kill Shouse. Hence there was neither occasion nor justification for any instructions on involuntary manslaughter. Martin v. Commonwealth, rsupra. Unfortunately, however, counsel made only a blanket objection to the instructions, and he did not move for a new trial, so the error was waived. See Hartsock v. Commonwealth, Ky., 382 S.W.2d 861 (1964); Rice v. Commonwealth, Ky., 387 S.W.2d 4, 6 (1965); 3 Stanley’s Instructions to Juries (1965 Supplement), § 797. Nevertheless, the verdict made possible only by this erroneous instruction provides insight to the probable prejudice occasioned by the interrogation we have .already mentioned.

It is our opinion that the original •purpose of the impeachment statute (now •CR 43.07) in referring to proof by the ■record was to provide against instances -in which the witness might deny that he had been convicted of felony. When he admits it, there is no reason to prove the record of conviction and, perforce, no reason for such further details as may otherwise have been disclosed by it. Henceforth the rule will be so construed. A witness may be asked if he has been convicted of a felony. If he says “Yes,” that must be the end of it, with the usual admonition. If he says “No,” refutation by the record will be limited to one previous conviction, again with the admonition.

What we have said here with reference to impeachment does not, of course, limit the right of the Commonwealth to prove the previous felony convictions charged in an indictment under the habitual criminal statute, and to ask the defendant, if he takes the stand, whether he admits them. But if he does admit them, there is no occasion to dwell upon them at further length, or to bring up other convictions for the purpose of impeachment.

After shooting Shouse, Willie left the scene. Several hours later a state trooper arrested him at the home of one Laura Miles in Eminence. Also present at Laura’s house was a man named Milton Hanley, whom the trooper had seen earlier in his search for Willie at the Rendezvous. During the questioning of the trooper by counsel for the Commonwealth the following exchange took place:

Q — “Who is Milton Hanley?”
A — “He is a boy from Henry County originally, now living in Shelbyville on probation, just been released — ”
BY MR. SMITH: “I object.”
BY THE COURT: “Overruled.”
BY MR. SMITH: “Why, Judge, Your Honor — ”
BY THE COURT: “Save your exception.”
BY MR. SMITH: “Well, I certainly will.”
Later, in the course of cross-examining Willie as to why he had left town, the prosecutor asked and was answered as follows:
Q — “All right. This story you tell the jury today you say you shot him in self-defense. Why didn’t you go up to the Shelbyville Police Department and turn yourself in, instead of going to Eminence, and have to be arrested four hours later in company with a known felon, Red Han-ley?”
BY MR. SMITH: “Object.”
Q — “Tell this jury that.”
A — “I was at Laura Miles’s house.”

The trial court did not rule on the objection to this manifestly improper question. Had that been the only defect in the record we might be inclined to say it was not enough to warrant a reversal, but the accumulation of prejudicial circumstances, capped by a verdict finding Willie guilty of an offense he patently did not commit, is enough to bring the case under RCr 9.26, which provides that a conviction “shall be set aside * * * or the judgment reversed on appeal, for any error or defect when, upon consideration of the whole case, the court is satisfied that the substantial rights of the defendant have been prejudiced.” We are satisfied that they were.

We are of the further opinion, though it has not been argued, that the evidence did not authorize an instruction on murder. Willie either is guilty of voluntary manslaughter or is not guilty at all, and if the evidence be the same on another trial the jury should be instructed accordingly-

The contention that because the Governor in 1961 restored Willie to his civil rights the Commonwealth cannot impeach him by proof of any felony committed prior to that time is not well taken. Const. § 145 merely provides for restoration of that which it takes away, the right of suffrage; it does not erase history. Nor does it in any way affect CR 43.07.

The judgment is reversed with directions for a new trial.


text:
    COMMONWEALTH of Kentucky, DEPARTMENT OF CHILD WELFARE, Appellant, v. William B. LORENZ, Jr., et al.. Appellees.
    Court of Appeals of Kentucky.
    Oct. 28, 1966.

      Robert Matthews, Atty. Gen., Lloyd R. Cress, Asst. Atty. Gen., Lynn T. Mitchell, Dept, of Child Welfare, Frankfort, for appellant.
    Walter B. Smith, Shelbyville, for ap-pellees.
   DAVIS, Commissioner.

The Department of Child Welfare (hereinafter Department) appeals from a judgment holding unconstitutional KRS 199.-470(4) and (6) as those sections existed by virtue of legislative enactment by the 1962 General Assembly. (1964 amendments to the sections are not involved upon this appeal.) The trial court held the statutory sections to be unconstitutional on three separate grounds: (1) unwarranted invasion of the judicial power by the executive branch of government; (2) no adequate standards are prescribed as guidelines for the Commissioner of Child Welfare in granting or denying his written consent to adoption; and (3) the legislation is discriminatory. The appellant Department asserts that all of these determinations by the trial court are erroneous; the appellees take the converse view.

On October 3, 1963, appellees, who are husband and wife, made application to the Commissioner of Child Welfare that a then unborn child be placed with them for adoption. This application was made pursuant to the requirement of KRS 199.470(6), which is quoted:

“All persons other than a licensed child-placing agency or institution and the department who wish to place or receive a child shall make written application to the commissioner for permission to place or receive a child. The commissioner shall grant or refuse permission for the applicant to place or receive a child as early as practicable, but in any case the decision shall be made within sixty days after the receipt of the application. In any case where the department refuses to approve the placement of a child for adoption when requested by the parent or parents of the child, or refuses the request of any person or persons that a child be placed with him or them for adoption, the decision of the department in so refusing shall he final unless within ten days after notice of refusal, the natural or proposed adopting parent or parents shall appeal to the circuit court of the county in which the adoption is proposed ; provided, however, that no placement shall be disapproved on the basis of the religious, ethnic, or inter-faith background of the adoptive applicant, if such placement is made with the consent of the parent. The department shall be made a party defendant to the appeal.”

On November 22, 1963, the Commissioner of Child Welfare denied the application of appellees, by writing of that date. On December 2, 1963, the present appellees filed in the Jefferson Circuit Court (county of their residence) an appeal from the Commissioner’s ruling. In the action so filed, the circuit court held unconstitutional certain sections of the applicable statutes, as noted, and ordered that ap-pellees be permitted to file their petition for adoption, subject to final decision of this court.

To further focus attention upon the issues at hand we quote KRS 199.470(4):

“No petition for adoption shall be filed unless prior to the filing of the petition the child sought to be adopted has been placed for adoption by a licensed child-placing institution or agency or by the department, or the child has been placed with written approval of the commissioner; but no such approval shall be necessary in the case of:
(a) A child sought to be adopted by a stepparent, grandparent, sister, brother, aunt or uncle;
(b) A child received by the proposed adopting parent or parents from an agency without this state with the written consent of the commissioner.”

It will be observed that the impact of this 'section is to foreclose the filing of a petition for adoption unless the Commissioner of Child Welfare has given written consent (with exceptions not applicable to these appellees).

The trial court ruled that the Department could present the record upon which the Commissioner had made his decision, but could not introduce any additional evidence. However, the trial court permitted the appellees to' present evidence in circuit court looking toward refutation of the record presented by the Department. Our view of the case makes it unnecessary for us to detail the evidence as adduced from the Department’s report and the evidence in behalf of appellees. The trial court did not make any finding as to whether the decision of the Commissioner was supported by the record or as to whether it was deemed arbitrary. The decision below was premised on constitutional grounds, which we now consider.

The first basis for the lower court’s ruling was his adjudication that KRS 199.470(4) provides an unconstitutional invasion of the judicial power, thus running afoul of Kentucky Constitution Sections 27 and 28. We cannot accept this view. The right of adoption is a statutory right; there has never been any inherent judicial power to permit adoption independently of enabling legislation. Villier v. Watson, 168 Ky. 631, 182 S.W. 869, L.R.A.1918A, 820; 2 Am.Jur.2d Adoption, Sec. 2, p. 861. Therefore, the legislative branch of government has the prerogative to fix the statutory processes for adoption. Among the salient features of the adoptive process, as prescribed by legislation, are court review and judgment. The limits of the court review are appropriately fixed by statute. There is no constitutional invasion of judicial power in requiring written approval of placement for adoption as a condition precedent to filing a petition for adoption in court. Especially is this true when the very statute specifies a judicial review of the propriety of the Commissioner’s withholding of consent for placement for adoption. Each of the litigants relies on American Beauty Homes Corporation v. Louisville and Jefferson County Planning and Zoning Commission, Ky., 379 S.W.2d 450, and Board of Education of Ashland School Dist. v. Chattin, Ky., 376 S.W.2d 693. It is our view that these decisions teach that no constitutional principle precludes the administrative procedures, reviewable by the courts, which are established in KRS 199.-470(6). On the contrary, the judicial review of administrative action within the limits iterated in the cited cases assures the constitutionality of the procedure.

Neither do we regard the legislation at hand as unconstitutional for failure to prescribe adequate standards by which the Commissioner of Child Welfare shall decide whether to grant or deny approval for placement for adoption. The views of this court in this field have been fully stated in Butler v. United Cerebral Palsy of Northern Kentucky, Inc., Ky., 352 S.W.2d 203, and Commonwealth v. Associated Industries of Ky., Ky., 370 S.W.2d 584. We hold that the principles enunciated there rule the case at bar on the question under consideration.

Finally, the statute was deemed unconstitutional by the trial court .because of improper classification. It is noted that certain relatives and welfare agencies are not required to obtain the written consent of the Commissioner for placement for adoption as a condition precedent to filing a petition for adoption. We have said that “[I]f any possible reasonable basis can be conceived to justify the classification, then it should be upheld.” See Markendorf v. Friedman, 280 Ky. 484, 133 S.W.2d 516, 519, 127 A.L.R. 416. In Meredith v. Ray, 292 Ky. 326, 166 S.W.2d 437, upholding a classification defining a “dependent child,” among other things, as one “ * * * living with his father, mother * * * ” and certain other named relatives, this court said that the purpose of the classification may have been to preserve and encourage the unity of the family. It is patent, we feel, that the classification provided in the instant legislation is reasonable. See 5 Ky. Digest, Constitutional Law, @=⅞08(1) et seq.

Since the trial court deemed the statute unconstitutional, there was no adjudication below as to whether the refusal of approval was arbitrary. In view of the nature of this proceeding, it would be unrealistic to remand for a determination of the propriety of the Commissioner’s action in 1963. The child has been with the appellees during the interim; changes in conditions and demonstration of fitness may impel a different administrative finding. Fundamentally the best interests of the child must fashion the ultimate determination of whether the Commissioner should grant or deny approval for placement for adoption. This sensitive question should be determined in light of the present conditions.

The judgment is reversed with directions to enter a new judgment remanding the matter to the Department for a new determination, based on present circumstances, as to the granting or denying of permission for placement for adoption.


author: MOREMEN, Judge.

text:
    Pete DAVIS, Petitioner, v. Hon. W. R. KNUCKLES, Judge, Bell Circuit Court, Pineville, Kentucky, Respondent.
    Court of Appeals of Kentucky.
    Nov. 4, 1966.

      Pete Davis, pro se.
   MOREMEN, Judge.

This is an original action in this court whereby petitioner Pete Davis seeks to obtain an order requiring the Judge of the Bell Circuit Court to furnish him with a copy of the record made in a proceeding filed under RCr 11.42, so that he may perfect an appeal from the judgment in that case. No response has been filed to this petition, therefore the allegations of the petition must be treated as being confessed. Wahl v. Simpson, Ky., 385 S.W.2d 171; and Moore v. Pound, Ky., 390 S.W.2d 159.

Under Davenport v. Winn, Ky., 385 S.W.2d 185, Davis is entitled to have a copy of the record transmitted to this court and a copy thereof sent to him at the Eddyville Penitentiary where he is now incarcerated. The petition is therefore granted and an order of mandamus shall issue requiring the Hon. W. R. Knuckles, Judge of the Bell Circuit Court, to cause copies of the record to be delivered in accordance with this opinion.

Granting mandamus.


author: PER CURIAM.

text:
    In re Nixon C. DUNCAN.
    Court of Appeals of Kentucky.
    Oct. 28, 1966.
   PER CURIAM.

On February 19, 1965, a complaint was; filed with the trial committee of the Board of Governors of the Kentucky Bar Association charging that respondent, Nixon C. Duncan, was convicted in Jefferson Circuit Court on May 13, 1964, on a charge of uttering checks knowing them to contain forged endorsements. The conviction resulted from respondent’s plea of guilty.

The trial committee conducted a hearing, pursuant to proper notice, at which respondent failed to appear. Preliminary to the hearing, Kenneth L. Anderson, an attorney, was appointed by the trial committee to protect the interest of respondent and to notify him of the proceedings. Diligent efforts were made by Mr. Anderson to communicate with respondent, but they were without results.

On May 14, 1965, respondent was served with rule issued. by this court. He has not answered the rule or briefed the case. In fact, he has remained as silent as the tomb since this proceeding was commenced.

The Board of Governors through its trial committee recommended the permanent disbarment of respondent. Such recommendation is now accepted and followed. Accordingly, it is ordered by this court that respondent, Nixon C. Duncan, be permanently disbarred from the practice of law in this Commonwealth.


author: WILLIAMS, Judge.

text:
    Robert James SHARP, Jr., Petitioner, v. Hon. B. Robert STIVERS, Judge, Laurel Circuit Court, London, Kentucky, Respondent.
    Court of Appeals of Kentucky.
    Nov. 4, 1966.
    Robert James Sharp, Jr., pro se.
    B. Robert Stivers, London, pro se.
   WILLIAMS, Judge.

Robert James Sharp, Jr., petitions this court to mandamus B. Robert Stivers, Judge of the Laurel Circuit Court, to allow him a record of proceedings had on a motion to vacate judgment filed pursuant to RCr 11.42.

The trial judge’s response states that:
“ * * * he (the petitioner) received a fair and impartial trial, and that there was no possibility of any error being committed at his trial.
“For the reasons given, this Court feels that it is a waste of the taxpayers’ money and the time spent for Robert James Sharp, Jr., to appeal to the Court of Appeals.”

The petitioner’s right to appeal may not be arbitrarily denied him by the court in which he was tried. It may be that his appeal is frivolous and, in the long run, a waste of time and money. However, that is a question which must be decided by this court. Until the record of the proceedings of the trial court is furnished to this court we are unable to make such adjudication. Bingham v. Stivers, Judge, Ky., 396 S.W.2d 800 (1965).

The petitioner has been granted leave by this court to proceed in forma pauperis. It was ordered in Bingham v. Stivers, Judge, supra, that the respondent cause to be furnished to the petitioner a transcript of the proceedings on the petitioner’s motion to vacate so that an appeal may be prosecuted to this court by petitioner if he so desires. It is so ordered here.


author: HILL, Judge.

text:
    Hazel McGREGOR, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    Court of Appeals of Kentucky.
    Oct. 28, 1966.
    James E. Story, Eddyville, for appellant.
    Robert Matthews, Atty. Gen., David Mur-rell, Asst. Atty. Gen., Frankfort, for ap-pellee.
   HILL, Judge.

RCr 12.54 provides that an appeal to this court may be taken within ten days from the entry of judgment; but if “timely” motion for new trial has been made, the appeal may be taken within ten days after the motion is overruled. RCr 10.06 limits the time for service of a motion for new trial to the period of five days after return of the verdict — except that if it is made on the ground of newly discovered evidence, the motion may be made at any time within one year after entry of the judgment or even later if the court for good cause permits.

Appellant was convicted on October 29, 1965. On December 2, 1965, having failed to appeal within ten days after entry of the judgment and having failed to move for a new trial within the prescribed time of five days, he served a motion for new trial (without a supporting affidavit) on the ground of newly discovered evidence. This motion was overruled on December 13, 1965, and notice of appeal was filed on December 18, 1965.

The rules cannot be sensibly construed to permit an appeal that would otherwise be untimely by the simple device of making a motion for new trial on the ground of newly discovered evidence. If such a motion is made more than five days after return of the verdict, the only reviewable “judgment”’ is the final order overruling the motion; and the review is restricted to the grounds timely raised by the motion.

Appellant has moved for an appeal under KRS 21.140(2). His grounds are addressed entirely to the merits of the case. He makes no contention that the order overruling his motion for a new trial was erroneous.

The motion for appeal is overruled.


text:
    Neville Parker MATTHEWS, Petitioner, v. Honorable J. Miles POUND, Judge, Jefferson Circuit Court, Criminal Branch, Second Division, Respondent.
    Court of Appeals of Kentucky.
    Nov. 4, 1966.
    Neville Parker Matthews, pro se.
   DAVIS, Commissioner.

By his petition filed here as an original action Neville Parker Matthews seeks an order requiring the respondent judge to furnish certain court records pertaining to> an inquest, so that he may use these records in a habeas corpus proceeding in the Lyon Circuit Court. We deny the relief because the records being sought are available through the processes of the Lyon Circuit Court. See Matthews v. Farabee, Commissioner, Ky., 407 S.W.2d 131, (decided October 21, 1966).

Mandamus is denied.


author: CULLEN, Commissioner.

text:
    WEBB TRANSFER LINE, INC., Appellant, v. HARRIS TRUCKING COMPANY, Inc., the Department of Motor Transportation of Kentucky and Ben T. Combs, Commissioner, Appellees.
    Court of Appeals of Kentucky.
    Oct. 28, 1966.
    H. V. McChesney, Jr., and Robert H„ Kinker, McChesney & Kinker, Frankfort,, for appellant.
    R. Vincent Goodlett, Frankfort, Virgil' Gaitskill, Dept, of Motor Transportation,, George M. Catlett, Catlett & Amato, Frankfort, for appellees.
   CULLEN, Commissioner.

Webb Transfer Line, Inc., a common carrier serving Shelbyville, Kentucky, appeals, from a judgment of the Franklin Circuit Court which upheld an order of the Kentucky Department of Motor Transportation granting a contract carrier permit to Vernon Jones, d/b/a Jones Transfer Line, authorizing the intrastate transportation of materials and supplies from various Kentucky points to the plant of Roll Forming Corporation in Shelbyville, and the transportation of manufactured products from the plant to various Kentucky points. (Pending this appeal the permit in question was transferred by Jones to Harris Trucking Company, which has been substituted here as an appellee.)

The order of the department granting the permit was issued in April 1955, and an appeal was taken promptly to the circuit court. However, for some reason which the parties have not chosen to explain to us, the case lay dormant in the circuit court for 10 years, and judgment was not entered until January 1955.

The appellant contends, first, that the evidence did not support the finding of the department that Jones was “fit” to perform the service, which was one of the qualifications specified in KRS 281.630(5), 1953 Edition. The contention is based on evidence that Jones, before obtaining the permit in question, had undertaken for a period of time to haul property for Roll Forming Corporation under some other permit, or as a “U-Drive-it” operation, and later had attempted to continue the service through the device of purporting to sell one of his trucks to Roll Forming Corporation. Each of these operations was stopped by DMT orders. Jones testified, however, that some of these operations were pursuant to suggestions by an agent of the department as to how he might validly proceed. Also, Jones gave testimony from which it might reasonably be concluded that the sale of the truck was genuine. In our opinion the department was warranted in concluding that Jones had not followed a policy or pattern of evasion of the law, or committed violations of major significance. See Hazard Express v. Combs Motor Freight, Inc., Ky., 372 S.W.2d 807. Accordingly, its finding that Jones was “fit” was proper.

The appellant next maintains that the granting of the permit to Jones was not “consistent with the public interest and the transportation policy declared in” KRS Chapter 281 (this being another requirement set forth in KRS 281.630(5), 1953 Edition). This argument is predicated on the proposition that there was no showing of inadequacy of existing service or of the inability or unwillingness of existing carriers to render the service. The appellees argue that a showing of inadequacy of existing service was not a requirement under the statute as it read in 1955, specific language setting forth such a requirement not having appeared in the statute until the amendment of 1957. See now KRS 281.630(4). We think it is unnecessary to decide the statute construction issue, because in our opinion there was, in any event, a sufficient showing of inadequacy of existing service in the sense that the service required by Roll Forming was so unique or specialized that existing common carriers would not be able to perform it in a reasonably satisfactory manner. See Truckway Corporation, 10s F.C.C. 329. Furthermore, there was some evidence of specific instances of unsatisfactory service by Webb. It is true, as appellant points out, that these instances involved interstate service, but that does not render the evidence irrelevant to the issue of the general character of Webb’s service. We think the evidence warranted! a conclusion of the department that the nature of the goods to be hauled and the time requirements of the shipper created a special service need so that the granting of the permit to Jones was consistent with the public interest and the transportation policy declared in the Kentucky motor carrier statutes.

The third contention of the appellant is that the rates proposed to be charged by Jones were not “comparable” to those of the common carriers, as is required by KRS 281.675(2). The record shows that the rate differential in truckload lots is not great; the big differential is in less than truckload lots, where Jones’ rates are from 37% to 43% lower than those of the common carriers.

We said in Coyle v. Department of Motor Transportation, Ky., 298 S.W.2d 303, that unless there is “some acceptable reason” for a large (in that case 60%) differential in the rates, the rates cannot be considered to be comparable. In the instant case, it appears that the size of the differential is attributable in substantial part to the -fact that the less than truckload rates of the common carriers are much higher than their truckload rates, whereas Jones’ are only a little higher. This points up the fact that to a common carrier, hauling goods for everyone, there are extra costs, attributable to loading problems, lower volume, etc., in the handling of less than truckload lots. Some of those extra costs may not arise in the case of a contract carrier who is hauling the goods of only one patron. Furthermore, with a specialized kind of service, operating methods and devices may be designed specifically to meet the peculiar requirements of the service, which will reduce labor costs and handling time. We are not convinced that the differential in the instant case is so great and so lacking in justification that the department could not reasonably find the rates to be comparable.

It is our conclusion that the department acted properly in granting the permit to Jones. This conclusion makes it ünneces-sary for us to consider the equities arising from the fact that the appeal attacking the order of the department was allowed to gather dust for 10 years in the circuit court, during which time, in two proceedings in which Jones sought a common carrier certificate, the fact that Roll Forming Corporation was receiving contract carrier service from Jones was advanced by Webb and other carriers (with some degree of success) as a reason for denying a common carrier certificate to Jones. See Jones v. Webb Transfer Line, Inc., Ky., 328 S.W.2d 407; Webb Transfer Line, Inc. v. Jones, Ky., 379 S.W.2d 444.

The judgment is affirmed.


text:
    Fenley WARD, Appellant, v. Stella Lavern WARD (Now Warner), Appellee.
    Court of Appeals of Kentucky.
    Nov. 4, 1966.

      M. L. Perkinson, LaGrange, for appellant.
    John Frith Stewart, Louisville, for ap-pellee.
   CULLEN, Commissioner.

The appeal is from a judgment refusing to change a child custody order.

On November 2, 1955, appellee, Stella Ward, obtained a divorce from appellant, Fenley Ward, and was granted custody of their infant child, Pamela. Fenley was given the privilege of visiting his daughter at certain specified times.

Approximately ten years later, in February 1965, Fenley filed a motion seeking to ■obtain custody of Pamela but at his own request the motion was dismissed.

On July 22, 1965, Fenley again moved for his daughter’s custody, alleging in part that Stella was not a fit and proper person to have custody of the child and that it would be to her best interest to place her with him. The judge set the motion for a hearing on August 20, 1965.

On answering interrogatories served upon him Fenley stated that there had been no change in Stella’s morals since the February 1965 motion. When the case was heard the trial judge refused to permit Fenley to introduce evidence as to conditions existing prior to the February motion, and thereupon overruled Fenley’s motion seeking a change in the custody order. The trial judge also ordered Fenley to pay the costs, including a fee of $50 for the attorney representing Stella.

Fenley’s principal complaint on this appeal is that the trial court erred in refusing to permit evidence as to any change of conditions occurring prior to the February motion. He maintains that the February motion should not have operated as a cutoff date because the motion was voluntarily dismissed and there was no hearing on the merits.

We think that there was no prejudicial error under the particular circumstances of this case. It must be borne in mind that the principal concern always is the welfare of the child. The courts should not entertain modification proceedings except upon a showing that the welfare of the child requires a change. Fenley’s withdrawal of his February motion properly could be treated by the trial court as an admission that the welfare of the child had not been placed in jeopardy by anything that had occurred up to that time. Certainly it showed that Fenley did not think that action of the court at that time was necessary to protect the child’s interests. Therefore, the court was justified, at the time of the July motion, in refusing to consider any claimed change of condition prior to the February motion.

Fenley contends that there was error in requiring him to pay the fee awarded Stella’s attorney. This raises a question on which the law is not clearly settled. See Wilkerson v. Wilkerson, Ky., 335 S.W.2d 552. However, in view of the history of the proceedings here, the respective financial conditions of the parties, and the minimal nature of the fee allowed, we cannot say that the error, if any, was prejudicial.

The judgment is affirmed.