Massachusetts Bonding & Ins. Co. v. Norwich Pharmacal Co.

• Decision Date: 04 April 1927
• Docket Number: No. 249.,249.
• Citation: 18 F.2d 934
• Parties: MASSACHUSETTS BONDING & INS. CO. v. NORWICH PHARMACAL CO.
• Court: U.S. Court of Appeals — Second Circuit

18 F.2d 934 (1927)

MASSACHUSETTS BONDING & INS. CO. v. NORWICH PHARMACAL CO.

No. 249.

Circuit Court of Appeals, Second Circuit.

April 4, 1927.

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Gannon, Spencer, Michell & Reiley and Charles E. Spencer, all of Syracuse, N. Y., for plaintiff in error.

Gilbert & Gilbert, of New York City (Abraham S. Gilbert, of New York City, of counsel), for defendant in error.

Before MANTON, HAND, and SWAN, Circuit Judges.

HAND, Circuit Judge (after stating the facts as above).

The defendant's first point is that the plaintiff could with reasonable diligence have discovered the defalcations of Kenyon earlier than it did, and that for this reason it had not fulfilled the condition of the policy requiring it to give notice within ten days after discovery. It argues that all the documents which it eventually used to make up the tabulation and prove the loss, were in its possession for more than two years before June, 1924, and it was always under a duty to watch its employees. Further that, if it failed in exercising such diligence, the time for notice ran from that at which it should have discovered the thefts. Finally, that the District Judge was therefore wrong in deciding that question himself; he should have let the jury say whether the plaintiff should not have discovered at some earlier time all that it discovered in the end.

The language of the policy, if nothing more, is an answer. It reads, "Loss shall be discovered during the continuation of this suretyship, or within thirty-six months thereafter; and notice thereof shall be delivered * * * within ten days." The parties by this themselves agreed upon a period within which the insured was obliged at his peril to discover the loss. Discovery was contrasted with the duty to make it, and it would pervert the meaning of the agreement to require more. It was only on actually learning of the thefts that the duty to give notice arose. "Discovery" may not indeed be an exact word; we need not try here to define it. It is enough that nobody can give it a content which includes the mere possibility of informing one's self from the materials at the plaintiff's disposal.

The form of the claim when rendered is also challenged; it is said to have no "items and dates of the losses," as required in the policy. There is no force in this objection either. Ignoring the fact that the defendant retained the claim without objection, it conformed with the condition in any event. Globe & Rutgers Ins. Co. v. Prairie Oil & Gas Co., 248 F. 452 (C. C. A. 2). The objection presupposes that each several peculation must be separately given both in time and in amount. Perhaps so, when these were ascertainable, but here that was impossible, and to require it would destroy the protection of the policy. It seems unnecessary to discuss so unreasonable a pretension; if the words could be twisted so far, the result would be a fraud upon the plaintiff.

The difficult question in the case, and the only other one which seems to us worth notice, is of the competency of the tabulation offered by the plaintiff. Error in its admission was not cured by the remittitur. Assuming that the vague testimony of Kerr that Kenyon stole on the average, one hundred dollars a week, would have been enough to support the verdict, the admission of the exhibit was a grave error, if it was not competent. Indeed, we are not left in this to inference, because the verdict shows that the jury accepted it to the dollar. We have no warrant for supposing that without it they would have thought Kerr's testimony enough on which to fix the amount of the thefts. Therefore, if the judgment is to stand we must say that the document was competent.

In the end the only parts which did not depend upon Kerr's own knowledge were the notations put upon the back of the orders, and the fact that the orders on file were complete records of all the stamps that were used in the shipping department. These furnished the credit items of the account; the charges were made by Kerr from moneys which she dispensed to the shipping clerk who bought the stamps, and from the entries with which in collusion with Kenyon she padded the stamp account, both of which were within her own knowledge.

The situation is the familiar one of voluminous records, made at the time in the daily routine of a large mercantile business, by entrants not produced. The question is in what cases it is necessary to supplement proof of the way in which the business is carried on and the entries are made, by the testimony of the entrants themselves. It is a matter in which the sluggishness of the law is especially disastrous, and where the intervention of the Legislature, which must be by general rules, cannot be as satisfactory as a step by step progress of the courts, if they are willing to progress at all. The routine of modern affairs, mercantile, financial and industrial, is conducted with so extreme a division of labor that the transactions cannot be proved at first hand without the concurrence of persons, each of whom can contribute no more than a slight part, and that part not dependent on his memory of the event. Records, and records alone, are their adequate repository, and are in practice accepted as accurate upon the faith of the routine itself, and of the self-consistency of their contents. Unless they can be used in court without the task of calling those who at all stages had a part in the transactions recorded, nobody need ever pay a debt, if only his creditor does a large enough business. That there should not be checks and assurances of veracity we do not suggest; it is indeed possible to expose adversaries to genuine danger, but to continue a system of rules, originally designed to relieve small shopkeepers from their incompetence as witnesses, into present day transactions is to cook the egg by burning down the house.

We have already dealt with the matter at length in The Spica (C. C. A.) 289 F. 436, and less in detail in Straus v. Victor Talking Machine Co. (C. C. A.) 297 F. 791, 802, 804. In the Spica, we said following Mr. Wigmore, §§ 1521, 1530, that the question was one of discretion for the trial judge, and the "mere inability by reasonable effort to find the man or men who could speak with personal knowledge" might be enough to excuse the failure to produce them. That was a case in the admiralty, a circumstance to which we referred, but we can see no reason why there should be any difference in an action at law, and we acted on that assumption in Straus v. Victor Talking Machine Co. The question, as we view it, like many other questions as to the competence of evidence, is of degree, and is not susceptible of absolute regulation. The judge must be satisfied from the whole situation that the added credence to the document which the testimony of the entrants will bring does not justify the expense and difficulty of getting them to the trial. It ought to appear that the document was itself prepared under a routine which warrants its reliability; that the missing entrants, if called, would in the nature of things have no recollection of the events recorded and could do no more than corroborate the existing testimony as to the course of business in which they had a part; that either because of their number, their distance from the place of trial, the difficulty of finding them, or for other reasons, the burden of producing them would be unreasonably heavy upon the proponent. These considerations are not exhaustive,...