State Bank of New Prague v. American Surety Co.

288 N.W. 7, 206 Minn. 137, 1939 Minn. LEXIS 636
CourtSupreme Court of Minnesota
DecidedOctober 27, 1939
DocketNo. 32,087.
StatusPublished
Cited by13 cases

This text of 288 N.W. 7 (State Bank of New Prague v. American Surety Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Bank of New Prague v. American Surety Co., 288 N.W. 7, 206 Minn. 137, 1939 Minn. LEXIS 636 (Mich. 1939).

Opinion

Peterson, Justice.

Plaintiff sues to recover indemnity for pecuniary loss sustained through the defalcation of its former cashier covered by a fidelity bond issued by defendant. The bond was dated February 24, 1933, and continued in effect from that date for one year. It provided for indemnity not to exceed $10,000 for pecuniary loss sustained by plaintiff as the employer of the cashier through the latter’s fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, misapplication, misappropriation, or any other criminal act or omission, while the employe held any position in plaintiff’s service commencing from the date of coverage of the employe and continuing until the termination. of the insurance.

*139 The bond contained a provision to the effect that upon discovery by the employer of any loss insured thereunder the employer should within ten days thereafter give the defendant written notice thereof and within three months after such discovery file with defendant a written claim giving the particulars of such loss.

The complaint set forth two causes of action for losses which plaintiff paid to one Connors. The one alleged that in 1930 Connors deposited $1,700 and the other that on April 1, 1933, he deposited $800, for which plaintiff’s former cashier was to issue certificates of deposit to Connors, and that he appropriated the money and gave Connors, who ivas illiterate and did not understand what was done, his personal promissory notes. It alleged that Connors recovered a judgment against plaintiff upon both causes of action, which plaintiff discharged on May 23, 1936, by payment of $2,000 in cash, of which $900.36 was in full for that part of the judgment based on the $800 item. The cause of action for the $1,700 item, being for a loss by an act which occurred prior to the issuance of the bond, was abandoned at the trial.

The bond showed without dispute that on April 1, 1933, defendant stood in relation of indemnitor to plaintiff for the alleged loss of $800. There was evidence to show that on March 8, 1935, Connors through his attorney made written claim on plaintiff for $2,500 and interest for the $1,700 and $800 items; that plaintiff immediately notified defendant of Connors’ claim and discussed the matter with defendant’s representatives; that it made diligent search of its records and found no evidence to substantiate a claim in favor of Connors; that it denied liability; that Connors commenced suit on the two causes of action and recovered a judgment for both of them with interest as claimed.

Plaintiff over defendant’s objection showed the loss as to the $800 item by the judgment roll and relevant portions of the court’s charge in the action in which Connors recovered judgment against it. The evidence in the Connors case, offered by plaintiff, was excluded on defendant’s objection. In the Connors case *140 plaintiff asserted the same defenses to this claim, which defendant relies on here.

It claimed that the transaction of April 1, 1933, relative to the $800 item, was personal between Connors and the cashier, that the bank urns not a party to nor concerned therein, that the promissory note evidenced the personal nature of the transaction, and that Connors, Avith knowledge of the fact that the note Avas given for the cashier’s personal obligation, accepted payment of interest from him, waived the fraud, if any, and ratified the transaction. Both Connors and the cashier testified at the Connors trial. The court in its charge to the jury in the Connors case stated that Connors based his right to recover upon the claim that he deposited $800 with the bank on April 1, 1933; that defendant’s defense Avas as outlined and that “so, in this case, if you find that the claims of the plaintiff have been established by the evidence and is true, then you would be warranted in finding a verdict in favor of the plaintiff,” otherwise not, and that if the verdict Avas in favor of plaintiff he was to be alloAved interest from April 1, 1933.

The evidence shoAved beyond dispute that there was a transaction involving $800 on April 1, 1933, between Connors and the former cashier. The question was Avhat was that transaction. Immediately upon commencement of the Connors action, plaintiff notified defendant and requested it as such indemnitor to assume the defense, Avhich it declined. The parties stipulated that plaintiff promptly notified defendant of the pendency of the Connors action, tendered it the defense, which it declined, and that defendant had a fair opportunity to defend if it had elected to do so. It Avas further admitted that plaintiff defended the Connors action as ably as could be. No claim or suggestion of fraud or collusion Avith respect thereto Avas made. The court below was of the opinion that the judgment in the Connors action was conclusive against defendant as to the fact of defalcation and the amount thereof and so held.

Then, subject to objection, it received the former cashier’s testimony explaining the transaction, to the effect that on April 1, *141 1933, he gave Connors the $800 note in question not for the receipt of cash, but in renewal of a balance due to Connors on account of transactions which had their inception in the receipt by the cashier of $1,700 in cash from Connors’ brother in 1930. This was the same testimony which he gave for plaintiff in defense of the Connors suit. Connors’ death occurred before this case came to trial.

Findings were made as to the defalcation and amount thereof, based upon the Connors judgment; that plaintiff sustained loss by the payment of the Connors judgment in the amount of $900.36; that the policy covered the loss; and that plaintiff was entitled to recover the amount thereof with interest and costs.

Defendant assigns as error here on points raised below: (1) That the judgment in the Connors action was not admissible to prove the defalcation or the amount thereof, upon the grounds that defendant was not a party to that action; (2) that holding that the Connors judgment is binding on defendant denies to it due process of law; (3) that the defalcation was not within the coverage because, while it resulted from an act within the coverage period, it was not discovered until afterwards; (4) that notice of the discovery of loss and proof of claim were not given within the time limited by the policy; and (5) that it was not permissible to show that the parties agreed that $900.36 of the $2,000 paid in satisfaction of the Connors judgment was allocated as payment of the $800 cause of action.

A judgment recovered against an indemnitee upon an obligation covered by a contract of indemnity is conclusive against the indemnitor in an action by the indemnitee to recover indemnity, if the indemnitee gave the indemnitor notice of the pendency of the action in which the judgment was recovered and requested him to . assume the defense. Milavetz v. Oberg, 138 Minn. 215, 164 N. W. 910; Trustees of First Presbyterian Church v. U. S. F. & G. Co. 133 Minn. 429, 158 N. W. 709; G. N. Ry. Co. v. Akeley, 88 Minn. 237, 92 N. W. 959; Note, 132 A. S. R. 759; 1 Freeman, Judgments (5 ed.) § 447; 34 C. J. p. 1031, § 1463. There must be identity of issues in the case in which the *142 judgment was recovered and the one in which the judgment is used as evidence. B.

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Cite This Page — Counsel Stack

Bluebook (online)
288 N.W. 7, 206 Minn. 137, 1939 Minn. LEXIS 636, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-bank-of-new-prague-v-american-surety-co-minn-1939.