On the basis of the foregoing, we find that White has met its burden of proof and is entitled to recover on the full amount of its claim against Prov-Wash ($14,585.02).
We reject as meritless Prov-Wash's argument that White sustained no loss during the policy period because the funds remitted by the individuals contained on the work sheets covering the period of the Prov-Wash policy were received by White and deposited in its bank account. This overlooks the admitted fact that these funds were used to cover previous shortages in other customer accounts as well as the fact that the embezzlement was continuing, and, as the calculations show, waxing during the period of the Prov-Wash policy. Cf. Edmunds-Bouvier Savings & Loan Ass'n v. New Amsterdam Casualty Co., 8 Pa. D. & C. 2d 229 (Phila. C.P. 1956), aff'd per curiam, 389 Pa. 79, 132 A. 2d 181 (1957).
The remaining issue is that of Prov-Wash's subrogation claim against Boymel. We will resolve it on the merits, notwithstanding the fact that payment has not yet been made by Prov-Wash to White.
Contending, in essence, that Boymel was in a position to discover Belz' embezzlement of corporate funds, it alleges that his failure to do so constitutes a breach of some duty which he owed to Prov-Wash by virtue of his corporate capacities.
Prior to 1965, Boymel, a certified public accountant, was White's outside accountant. In that capacity, he made periodic unaudited statements for White until 1965. At that time, he was retained as White's treasurer and internal auditor for the purpose of watching over the interests of the controlling shareholder, who had left the active management of the company. Boymel's testimony was uncontradicted that his status as treasurer was purely perfunctory, and that as internal auditor, his responsibility was solely to see that the books were prepared and that statements and tax returns were prepared. As an officer of the corporation, he was not permitted, under the rules of the American Institute of Certified Public Accountants, to conduct an audit of the company and prepare certified returns.
Two further facts bear mention. First, when Boymel "came aboard" with White, he was informed that prior shortages had occurred, but was told that these shortages were small and that his job was not to track them down. Second, in early 1966, White had been audited by a team of outside auditors of Ford Company in connection with a proposed sale of White's business. The auditors were all certified public accountants and conducted a two-week audit of the books and records of the company. During that audit, nothing was discovered out of order. For these reasons, we find that there is no evidence that Boymel was negligent, even if he owed a duty to Prov-Wash, which we conclude he did not.
Prov-Wash maintains that Boymel, as internal auditor, is liable to it for his failure to discover the embezzlements which occurred while he was in White's employ. There is no evidence, however, to indicate that it was Boymel's responsibility to formally audit the books of the company and track down shortages. A cause of action in negligence is based upon a breach of duty, and where no duty exists, there can be no recovery. See, e.g., Dorn v. Leibowitz, 387 Pa. 335, 127 A. 2d 734 (1957); Stevens v. Reading Street Ry., 384 Pa. 390, 121 A. 2d 128 (1956). Prov-Wash did not even attempt to controvert Boymel's testimony, to the effect that he merely acted as an overseer of the bookkeeping function and as a preparer of tax returns, and had no duty to investigate the propriety of the company's accounts receivable.
In seeking to hold Boymel liable as treasurer of the corporation, Prov-Wash contends that White's by-laws provide certain duties to be handled by the treasurer, and that Boymel's failure to maintain a close watch over the activities of Belz constituted negligence in his capacity as treasurer. Prov-Wash has been unable to cite any cases in which the courts have held that, under Pennsylvania law, a treasurer has statutory non-delegable duties, the failure of which to perform gives rise to a cause of action in negligence. Absent any statutory duty, the facts clearly indicate that Boymel was treasurer in name only, and that he had no duties to perform in that regard. As we have already stated, there cannot be a cause of action in negligence for breach of a duty when, in fact, no duty exists. Accordingly, we hold that Boymel has breached no duties to either White or Prov-Wash.
For the reasons above stated, we hold that White is entitled to judgment against Prov-Wash in the sum of $14,585.02, and that Boymel, the third-party defendant, is entitled to judgment against Prov-Wash.
Under the applicable (Pennsylvania) law, White is entitled to interest at the rate of 6%, which we calculate to be the sum of $3,719.18. The combined amount of principal and interest, however, exceeds the face amount of the policy ($15,000). We will withhold our final Order pending receipt of memoranda from the parties, to be submitted within two weeks, on the subject of interest. Cf. Hafer v. Schauer, 429 Pa. 289, 239 A. 2d 785 (1968).