Clark & Jones, Inc. v. American Mut. Liability Ins. Co.

• Decision Date: 05 June 1953
• Docket Number: Civ. A. No. 2147.
• Citation: 112 F. Supp. 889
• Parties: CLARK & JONES, Inc. v. AMERICAN MUT. LIABILITY INS. CO.
• Court: U.S. District Court — Eastern District of Tennessee

112 F. Supp. 889

CLARK & JONES, Inc. v. AMERICAN MUT. LIABILITY INS. CO.

Civ. A. No. 2147.

United States District Court E. D. Tennessee, N. D.

June 5, 1953.

Frost & Jacobs, Cincinnati, Ohio, Poore, Cox, Baker & McAuley, Knoxville, Tenn., for plaintiff.

Dinsmore, Shohl, Sawyer & Dinsmore, Cincinnati, Ohio, Richard W. Todd, Cincinnati, Ohio, Clyde W. Key, Knoxville, Tenn., for defendant.

ROBERT L. TAYLOR, District Judge.

This is an action to recover on a comprehensive crime policy carried by defendant as insurer in favor of plaintiff against defalcation of plaintiff's employees, the limit of the policy being $25,000, the defalcation resulting in loss to plaintiff being that of Neil Godwin, in the alleged amount of $9,587.50. The complaint says that the insurer was notified of the default and claim made for indemnity, which has been refused. The complaint, as amended, also sets out the coverage provisions relied on, alleges that nonpayment is in bad faith, for reason of which plaintiff sues also for the statutory penalty provided by Tennessee Code § 6434.

Defendant has moved to strike from the amended complaint the following paragraph:

"On November 17, 1951, and at the time of the discovery above referred to, the said Neil Godwin stated both orally and in writing, voluntarily and in the presence of witnesses, that during the five year period immediately prior thereto that he had taken from the plaintiff's funds and appropriated for his own use approximately six dollars and fifty cents ($6.50) per day. The said Neil Godwin died on or about December 11, 1951."

The motion to strike is on the ground that the quoted paragraph "is irrelevant and immaterial to any issue involved herein, and any evidence in support of said averment would be inadmissible as against this defendant." In support of defendant's proposition, a number of Tennessee cases are cited. These cases will now be discussed. One of the cases cited is, Cobb, Welsh & Co. v. Johnson, 1854, 34 Tenn. 73. Here a slave of plaintiff (Johnson) was hired to defendant for use in ore operations. The slave was killed by a falling ore bank and an action brought in trover for conversion. Verdict and judgment for plaintiff was reversed because of admission of certain statements and admissions of one Perkins, an agent of defendants. The admissions and statements of Perkins were made the day after the slave was killed.

The court said:

"Perkins was a competent witness for either party, and could have been introduced, if his evidence was desired.

"The declaration of an agent is not evidence against his principal, unless they are directly connected with, and made a part of the transactions of the agency. If they be at a time subsequent to the act, or unconnected with it, they are hearsay, and therefore inadmissible. To make the statements of Perkins competent, they must have been made at the time the thing under investigation occurred, so as to constitute a part of it.

"This is what is meant by the res gestae. 1 Greenl. on Evidence, 113, 114, Nelson v. State, 2 Swan. Tenn. 237 260; Trousdale v. Philips, 2 Tenn. 384."

In the Cobb case the declarant was living and available as a witness. The declarant was not the principal of a surety; he was the agent of a principal—servant of a master. In the case here, the declarant is dead, his unavailability being an essential point in favor of admission of the declaration. Also, this is a declaration by a principal against the interest of the principal (Neil Godwin) as well as against the interest of the surety on his bond. Plaintiff says, also, that he was apprehended in the act of embezzlement. If that should prove to have been so, the declaration might be regarded as part of the res gestae.

Another case cited is Trousdale, etc. v. Philips, 1852, 32 Tenn. 384, where an action was brought against a surety for the sheriff, who had defaulted. Some time after the default one James allegedly overheard the sheriff admit his default. It was held that the testimony of James as to the overheard statement was rightly excluded.

The court said, 32 Tenn. at page 384:

"In order to make the declarations and statements of the principal good against the surety, in these kind of bonds, they must be made when the business is transacted, and in connection with it, so as to become a part of the res gestae. They can be admitted on no other principle. The surety is bound for the acts and conduct of his principal, and not for what he may say he had done. It being, then, only for the acts of the sheriff that his surety is bound, these acts must be made out by competent evidence, and not by the declarations of the sheriff at a subsequent time, and unconnected with any official action then transpiring, of which such declarations would constitute a part, so as to fall under the rule laid down in 1 Greenleaf on Evidence, sec. 187, and other sections. In the case of Young et al. v. Hare, 11 Humph. Tenn. 303, this rule is fully recognized; but the written acknowledgements of Young, that he had received money as clerk of Jackson circuit court, for Hare, as jailor, on sundry bills of cost, were admitted, because that was a motion or proceeding against the officer, Young, and his securities; and being good evidence against him, it could not be excluded."

In the Trousdale case, the declarant, for all that appears, was living and available as a witness. Also, the declaration was not a part of the res gestae.

Defendant further cites Young v. Hare, 1850, 30 Tenn. 303, wherein an action was brought against Young, clerk of the circuit court, and against his sureties, to recover funds collected for but not turned over to Hare, as jail fees. Judgment for Hare was affirmed.

Young, the clerk, admitted in writing that he had obtained the fees. The sureties objected to admission of the writing, on the ground that it was not made in the performance of his office. But the court observed that the main action was against Young and that a judgment against him became by statute good against his sureties, thus taking the case out of the common law.

The court said, however, 30 Tenn. at page 304:

"In an action against the surety upon his collateral undertaking, the general rule is, that if the declarations of the principal were made during the transaction of the business for which the surety was bound, so as to become part of the res gestae, they are admissible as evidence, otherwise not."

Also cited by defendant is Snell and McGavock v. Allen, 1851, 31 Tenn. 208, wherein an action was brought against Snell and McGavock as sureties of Temple, a constable. Judgment for plaintiff was reversed, the court saying:

"We place the decision of the case upon the principle that the negligence of the plaintiff to follow up his lien, by causing process to issue to subject the property attached to the satisfaction of his judgment, must be treated as an abandonment of the lien."

On the matter of declarations of a principal, the court said:

"But the declarations of a principal are not, in general, evidence in an action against the surety upon his collateral undertaking unless made during the transaction, so as to become part of the res gestae."

It is not clear from the factual statements just how the question of admissibility came up and whose declaration was sought to be proved.

Defendant has also cited Wheeler v. State of Tennessee, 1872, 56 Tenn. 393. It appears in this case that Wheeler, a...