Andrews v. Minter Coal And Coke Company

• Decision Date: 20 November 1929
• Docket Number: 13,417
• Parties: ANDREWS ET AL. v. MINTER COAL AND COKE COMPANY
• Court: Indiana Appellate Court

168 N.E. 869

90 Ind.App. 320

ANDREWS ET AL. v. MINTER COAL AND COKE COMPANY

No. 13,417

Court of Appeals of Indiana

November 20, 1929

From Marion Superior Court (A42,517); Byron K. Elliott, Judge.

Action by the Minter Coal and Coke Company against John T. Andrews and the London and Lancashire Indemnity Company of America. From a judgment for plaintiff, the defendants appealed.

Affirmed.

Charles E. Henderson and Laurens L. Henderson, for appellants.

William W. Hammond, C. Severin Buschmann and George Young, for appellee.

OPINION

LOCKYEAR, J.

The appellee herein filed a complaint in the Marion Superior Court against the appellants, John T Andrews and the London and Lancashire Indemnity Company of America, in which it is alleged: That the appellee is engaged in the retail coal business in the city of Indianapolis that, on or about September 25, 1926, this appellee employed appellant John T. Andrews as cashier, bookkeeper and office manager of the appellee's office in said business; that said appellant had charge of the office, the making of all collections of money, and the keeping of the books, entries and papers of every kind and character concerning said business; that one of the conditions of said Andrew's employment was that he furnish a bond in the sum of $ 5,000 guaranteeing the faithful performance of his duties as such cashier, bookkeeper and office manager, and, in consideration of said employment, said appellant and the appellant indemnity company, executed and delivered a bond to this appellee, a copy of which bond is attached to the complaint and made a part thereof; that, by the terms of said bond, said appellant promised and agreed to make good and reimburse the appellee to an amount not exceeding the sum of $ 5,000 for any and all pecuniary loss of money, securities or other personal property belonging to the employer or in his possession (and for which he is legally liable) sustained by said employer by reason of any fraudulent or dishonest act or acts amounting to larceny or embezzlement committed by the employee during the term of such bond in connection with the duties of said position; also that appellant Andrews continued in the employment of the Minter Coal and Coke Company until about June 27, 1927, during which time Andrews was acting as cashier, bookkeeper and office manager; that said Andrews stole and embezzled from this appellee the sum of $ 5,000; that this appellee has performed all the conditions precedent on its part to be performed, and demands judgment for $ 5,000.

To this complaint the appellants filed separate answers in general denial. Appellant indemnity company filed a second paragraph of answer, alleging that the appellee became aware of acts of the employee, Andrews, which could have been made the basis of a claim under said bond, and failed to notify the appellant indemnity company, of said acts as provided in said bond, and says there is no liability on said bond for any act of Andrews after appellee became aware of said acts.

Appellant indemnity company also filed a third paragraph of answer, in which it is alleged that, in accordance with the provisions of the bond, it did, on March 18, 1927, give notice to appellee that said bond was cancelled, to become effective as of March 17, 1927, and says that there is no liability on said bond after March 17, 1927.

There was a trial by jury and a verdict rendered in favor of the appellee against both the appellants, upon which the court rendered a judgment of $ 2,029.27. The appellants filed separate motions for a new trial, in which it was alleged that the verdict of the jury was not sustained by sufficient evidence; was contrary to law; the damages assessed by the jury were excessive, and the verdict of the jury was erroneous, in that the assessment of the amount of recovery was too large. Motion for a new trial was overruled, to which ruling of the court, the appellants at the time excepted, and assigned as error the overruling of the separate motions for a new trial.

The bond provides that "the surety shall not be liable hereunder unless such loss shall be discovered while this bond is in force or within six months after the cancellation or termination thereof in accordance with its terms, provided, however, if the employee shall die or retire or be dismissed from the service of the employer while this bond is in force, the surety shall not be liable hereunder for any act or acts committed by the employee after the employer shall have become aware of any act of the employee which could be made the basis of a claim hereunder. The employer, upon discovering within the time herein provided, any act of the employee which might or could be made the basis of a claim hereunder, shall immediately notify the surety thereof at the Administration Office of the surety in Hartford, Connecticut. Such notice shall be given in writing and sent by registered mail. The employer shall, within ninety days after discovering that a loss covered hereunder has been sustained, file with the surety an itemized and duly sworn statement of the claim therefor. The surety may at any time terminate the obligation which it has assumed under this bond by giving the employer written notice of its election so to do, stating when such termination shall be effective and the surety shall not be liable for any act or default thereafter committed."

There was ample evidence to sustain the verdict of the jury against the appellant John T. Andrews. It appears in evidence that he began to work for the appellee, September 14, 1926, and continued until June of 1927. Gertrude C. Minter testified that she was the secretary and treasurer of the appellee company herein, and worked in the office while the appellant Andrews was there; that she managed the office and was also a bookkeeper; that she checked from the cash book, cash on hand, cash deposits in bank and in cash box and in the cash register for the month of September after Andrews came, and, in auditing and checking, found a discrepancy in the cash shown by the books and the actual cash on hand of $ 41.61; she then told Andrews there was a discrepancy in the cash book, and Andrews said he would find it, that it was in bookkeeping, and he worked on it constantly; discrepancies occurred each month until July 1, of the following year; one month, the books showed that, instead of being short, the company owed Andrews, and Andrews said it was simply a mistake in bookkeeping; at one time, Mrs. Minter told him that she was going to tell her husband, Otto Minter, president of the company, about it, and he said, "Don't tell him," that it was simply a mistake, and allayed her suspicions, and he said at one time to her, "You don't think I got it, do you?" and she said, "No, if I did I would not have you here"; the first time that she actually saw him take any money was in June, 1927.

It is claimed by the appellant that, upon these facts, as testified to by this witness, and the other circumstances set out in the evidence, about which there seems to be no dispute, it was the duty of the appellee herein to notify the appellant surety of this shortage within a reasonable time after the discovery of the discrepancies in the account, that the surety might take steps to protect itself in the premises.

It has been held that, under an employee's indemnity bond providing that the employer shall, on discovery of any fraudulent act on the part of the bonded employee, immediately give notice thereof to the indemnity company, the employer is not bound to report his suspicions to the company even though they are strong enough to justify, in his opinion, the discharge of the employee, but, after suspicion is aroused, reasonable diligence must be used in pursuing inquiries as to the facts. Fidelity & Guaranty Co. v. Western Bank (1906), 29 Ky. L. Rep. 639, 94 S.W. 3; American Surety Co. v. Pauly (1898), 170 U.S. 133, 18 S.Ct. 552, 42 L.Ed. 977; Perpetual Building, etc., Assn. v. Fidelity & Guaranty Co. (1902), 118 Iowa 729, 92 N.W. 686; Fidelity & Deposit Co. v. Courtney (1900), 103 F. 599; Donahue v. Insurance Co. (1883), 56 Vt. 374; Remington v. Fidelity & Deposit Co. (1902), 27 Wash. 429, 67 P. 989. Unless the lapse of time is so long as to be obviously a noncompliance with the contract, the question whether the notice was timely is one for the jury. Fidelity & Guaranty Co. v. Western Bank, supra.

The object of the bond or policy of insurance, as was said by Justice Harlan in the case of the American Surety Co. v. Pauly, supra, at page 144, was to indemnify or insure against loss arising from any act of fraud on the part of the insured. To require of the employer to report every act that looks suspicious would be to make the employer an insurer of his own employees.

This policy is to cover acts that amount to larceny or embezzlement, and the employer is required to report to the surety company, not discrepancies in bookkeeping, but acts that would be the basis of a claim against the surety, to wit, larceny or embezzlement. To report anything short of that would be reporting something outside of the policy and of no concern to the surety.

Aetna Insurance Co. v. Fowler (1896), 108 Mich. 557 66 N.W. 470, was a case where an insurance agent collected...