Sherwood & Roberts-Kennewick, Inc., a Washington corporation, hereinafter referred to as appellant, filed an action in the United States District Court for the Eastern District of Washington against St. Paul Fire & Marine Insurance Company, a Minnesota corporation, hereinafter appellee, to recover damages under a Mortgage Bankers Blanket Bond purchased by appellant from appellee. The bond provided in part that appellee 'undertakes and agrees to indemnify the insured, and their successors and assigns, all such losses not exceeding $250,000 * * * (1) By Reason of the fraud, dishonesty, forgery, theft, larceny (whether common law or statutory), embezzlement, wrongful extraction or misappropriation, or any other dishonest, criminal or fraudulent act, of any officer, clerk, servant or guest student of the Insured wherever committed and whether committed directly or in connivance with others.'

The complaint alleged that losses were incurred by reason of the dishonest or fraudulent acts of Robert D. Chamberlin, a vice-president of appellant and general manager of appellant's operations in Pasco, Kennewick and Richland, Washington, particularly those acts committed in connivance with one Palmer Walker, a dealer in motor vehicles.1

The parties stipulated that damage questions were to be reserved for later court determination and the liability questions were submitted to the jury in the form of interrogatories. From the adverse verdict, appellant filed a timely appeal, of which this court has jurisdiction under 28 U.S.C. 1291.

Sherwood & Roberts, Inc., Walla Walla, Washington, and its affiliated corporations, which included Sherwood & Roberts-Kennewick, Inc., appellant herein, Fairway Finance-Kennewick, Inc., Sherwood & Roberts-Pasco, Inc., and Fairway Finance-Pasco, Inc., conducted a general mortgage loan, finance, insurance and real estate business. Each of the four mentioned corporations was insured under the bond. Robert D. Chamberlin was employed by appellant in 1951. He advanced in the firm, and from July 22, 1958, was general manager of the activities of the four corporations with his headquarters in Kennewick, Washington. He was an experienced finance man in charge of the making and servicing of loans totaling several million dollars annually. His superiors in appellant were located in the home office at Walla Walla, Washington, some fifty miles from Kennewick. Dion, Krueger and Koster, mentioned above, were employed by some of the appellant corporations at the instance of Chamberlin.

Palmer Walker was a dealer in motor vehicles and owned and controlled various companies, including Walker Motor Company of Kennewick, Walker Motor Company of Union Gap, and European Motors of Kennewick, which later changed its name to Tri-City Rambler, Inc. Donald K. Williams d.b.a. T&W Motors operated a used car lot in Kennewick from March, 1957 to June, 1958.

Appellant (through Chamberlin) financed Palmer Walker and his corporations by making capital loans, personal loans, flooring loans and by the sale and financing of cars owned by appellant's employees through Walker and his companies. During the period from 1953 to 1959, Walker personally and his companies paid off appellant's loans in the sum of $2,357,826. Over $48,000 in interest was charged and received by appellant on these loans. From 1956 to 1959 appellant received discounts from consumer contracts purchased from Walker companies in an amount over $80,000.

During a part of this period appellant also financed automobiles for Donald Williams d.b.a. T&W Motors. Many of the cars so financed were owned by appellant's employees.

Two interrogatories were submitted to the jury, one asking whether Chamberlin had committed any acts of fraud or dishonesty in connection with certain transactions involving Palmer Walker and his corporations and the other whether Chamberlin, Krueger, Koster and Dion had committed any acts of fraud or dishonesty in connection with certain transactions involving Donald Williams.2 Both questions were answered in the negative by the jury.

Appellant contends on appeal that: (1) the undisputed evidence clearly showed that appellant was entitled to a directed verdict and that the court erred in failing to grant appellant's motion for such a verdict at the close of the evidence and in failing to grant its motions for judgment notwithstanding verdict or in the alternative its motion for a new trial; (2) the court erred in its instructions to the jury on the meaning of 'dishonesty and fraud', as used in the bond and in failing to give an instruction offered by appellant on the same subject; and (3) the court erred in rejecting certain offers of proof made by appellant and in failing to admit certain evidence relating to alleged admissions against interest of appellee.

We shall first consider appellant's contention that the district court erred in its instructions to the jury on the meaning of the terms 'dishonesty and fraud' and in failing to give an instruction offered by appellant3 on the same subject. It is the position of appellant that the instruction given by the court, set forth in the margin below,4 'wrote dishonesty out of the bond and out of the case.' We do not agree.

'Dishonest' is defined in Webster's New International Dictionary, Second Edition, as 'characterized by fraud; indicating a lack of probity; knavish; fraudulent; unjust' or 'disposed to cheat or defraud.' In Black's Law Dictionary, Fourth Edition, the word 'fraud' is described as consisting 'of some deceitful practice or willful device, resorted to with intent to deprive another of his right or in some manner to do him an injury' or, more generically, as 'embracing all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated.' Although perhaps not synonymous terms, 'fraud' and 'dishonest', as generally used, have similar meanings. Implicit in each is the concept of 'bad faith' or an intent to accomplish some wrongdoing. The district court specifically instructed the jury that if the acts or omissions which the appellant claimed were dishonest or fraudulent were the result of 'good faith' transactions, the appellant had not sustained its burden of proof. We feel that the instructions given sufficiently apprised the jury of the state of mind necessary to characterize an act as dishonest or fraudulent, as distinguished from a mere exercise of poor judgment or negligence, and can see no way in which appellant could have been prejudiced by them.

Appellant's contention that the court erred in failing to direct a verdict in its behalf is similarly without merit. A motion for a directed verdict raises solely a question of law, the movant taking the position that there are no controverted issues of fact upon which reasonable men could differ.5 In determining whether the motion should have been granted, we must consider the evidence in its strongest light in favor of appellee and must give appellee evert fair and reasonable intendment that the evidence can justify.6 The record is voluminous in this case and we do not intend to set forth in detail all of the evidence presented by each party on each of the several transactions at issue. The evidence introduced concerning these transactions was conflicting and could not be said to establish as a matter of law that any of the transactions involving Walker or Williams, which allegedly resulted in appellant's losses, involved fraud or dishonesty on the part of appellant's employees. Chamberlin testified at length concerning the principal transactions relied upon by appellant as showing fraud or dishonesty, e.g., sale of vehicles by Walker 'out-of-trust',7 and if his testimony were to be believed it could be concluded that his actions were within the scope of his authority and were dictated solely by his business judgment. Appellant's contention that Chamberline concealed information from his superiors as to the facts of the loans or as to Walker's actions in connection therewith was denied by Chamberlin. He contended that his daily reports to the main office gave all necessary pertinent information about the status of the Walker loan transactions and that at all times persons in the main office had adequate information. The credibility of his testimony was manifestly a matter for the determination of the jury and the jury chose to believe him.

Except in two instances, appellant did not contend that Chamberlin personally profited as a result of any of the transactions. We shall discuss the two exceptions.

In one, appellant contends that in connection with the purchase and sale by Chamberlin of a Simca automobile and the loan transactions in connection therewith, Chamberlin improperly obtained some funds from appellant. The transaction was a complicated one. It had occurred some four years before the trial, and although certain records were introduced of the transaction, it was not clear exactly what had happened. There was, however, testimony by Chamberlin and by another employee of the appellant companies (O'Herin) that Chamberlin received no money improperly as a result of the deal. The jury apparently chose to believe these witnesses and the credibility of their testimony was of course a matter for the jury's determination.

In the other instance, it was shown that in July, 1959, Chamberlin received ten shares of non-voting stock in one of the Walker companies without the knowledge of appellant. During this period the evidence showed that Walker was involved in a great many financial transactions and with a number of different companies. His affairs, to say the least, were complex. Chamberlin testified that in January of 1959 Walker told him that he was trying to arrange his estate, and wanted him to act as a trustee of his estate. Chamberlin stated that he would so act. The next discussion about the matter was about ninety days later. Chamberlin testified that Walker told him that he (Walker) had been advised by his attorney that the trusteeship 'or governing body of the estate would be the three managers of his corporations * * *, Colvins, Decker and Jumper, and that I was to be trustee and have authority over these men and that I was to be issued stock in the corporation.' The stock was to be in one of the companies. Later, on July 15, 1959, in Walker's office, Walker told Chamberlin that he had gone over the situation with his attorney, and that his attorney had advised him that the naming of the other directors of the trusteeship by name was not a satisfactory situation, that therefore they would be named by position, namely, managers of his other corporations, and that Chamberlin was still to have stock in Rambler and be the governing member of the trusteeship. Walker at that time told Chamberlin how he would like his companies operated in the event of his death. Chamberlin received ten shares of nonvoting stock at this meeting and he was instructed that he had no authority whatsoever in Walker's affairs until such time as the trusteeship came into being. No. dividends were ever paid on this stock, and in fact appellee contends that based upon the assets and liabilities of the company the stock had a negative or minus value. At or near the time that Chamberlin's resignation from appellant was accepted, the stock was returned by Chamberlin to Walker. Concerning this matter, Chamberlin testified in part as follows:

'THE COURT: In other words, did it occur to you that there might be a conflict of interests with Sherwood & Roberts or that your so taking this stock might have a benefit to Sherwood & Roberts?

'A: The stock didn't enter in, but the fact that we would have first knowledge of the estate I thought would be a benefit, yes. We had obligations with the corporation and if it was an immediate thing, why, we would be certainly advised and protected * * * and have first hand knowledge of anything that was happening in Mr. Walker's estate.'

Again, it appears that the jury accepted Chamberlin's explanation of this transaction, and we certainly cannot say as a matter of law that his conduct was either fraudulent or dishonest.

Another practice appellant complained about was that, during a portion of 1958 and on one or two occasions in 1959 Chamberlin exchanged ckecks of the Walker companies for checks of the appellant companies. This could be colloquially described as check kiting. The evidence disclosed no loss resulting to any party from this practice. Chamberlin explained in detail the situation as it existed during this period of time. He stated that he was experiencing difficulty in getting enough funds from the home office in Walla Walla to take care of the volume of business which had been committed in the Tri-City area. Apparently the Walla Walla home office was also in need of funds and was making demands for the return of funds. At times, this resulted in a book overdraft on the daily cash book of Sherwood & Roberts-Kennewick, Inc. Chamberlin explained that because of the overdraft situation and the further fact that the books could not be closed at the end of the month unless they were in the black, on certain occasions the practice of exchanging checks with the Walker companies was indulged in. He testified that the president of the company, Mr. Sherwood, had knowledge of the fact that there were book overdrafts upon the daily cash reports of Sherwood & Roberts-Kennewick, and that Sherwood talked with him about it. Chamberlin testified concerning this conversation that 'He called me and related that he was conscious of what was-- what the situation was, wanted to put me on notice that a book overdraft was one thing. However, if the book overdraft resulted in a bank overdraft, that I would be, in his terms, and I quote, standing alone.' Chamberlin's testimony as to this conversation was not rebutted by Sherwood.

While the check kiting practice was not one to be commended, since no financial advantage was gained by either party and in view of Chamberlin's contention, apparently believed by the jury, that it was only a practice used for the purpose of balancing the books, we cannot say as a matter of law that it was either fraudulent or dishonest.

After a careful consideration of the entire record, we hold that the district court property denied appellant's motion for a directed verdict. We also hold that there was ample evidence in the record to support the verdict.8

Appellant's final contention concerns the rejection of an offer of proof made by it in the absence of the jury.9 The offer of proof was intended to show that on June 30, 1960, Donald Sherwood, president of appellant had a telephone conversation with one Jones, claims superintendent of appellee, in which Jones said that Chamberlin and Walker 'were in it together' and 'were both guilty' and that they 'should try to get together, save them going to joint rooms in Walla Walla'; and that Jones had said in a later conversation on that same day that appellant's reputation was such that 'it couldn't be associated with two crooks like Walker and Chamberlin.'

The district court refused to allow these statements into evidence on the basis that they were too indefinite and general to be considered as admissions against interest and that their over-all prejudicial effect would considerably outweigh 'any probative value they might have.' We hold that the district court properly refused on these grounds to admit the statements into evidence.

An examination of the entire record convinces us that the case was fairly tried and that the judgment should be affirmed.