Farmers' & Merchants' State Bank v. Fidelity & Deposit Co.

• Decision Date: 29 May 1925
• Docket Number: No. 24410.,24410.
• Citation: 163 Minn. 333,204 N.W. 33
• Court: Minnesota Supreme Court
• Parties: FARMERS' & MERCHANTS' STATE BANK OF MORGAN v. FIDELITY & DEPOSIT CO. OF MARYLAND.

204 N.W. 33

163 Minn. 333

FARMERS' & MERCHANTS' STATE BANK OF MORGAN v. FIDELITY & DEPOSIT CO. OF MARYLAND.

No. 24410.

Supreme Court of Minnesota.

May 29, 1925.

Appeal from District Court, Redwood County; I. M. Olsen, Judge.

Action by the Farmers' & Merchants' State Bank of Morgan against the Fidelity & Deposit Company of Maryland. After verdict for defendant, plaintiff appeals from order denying motion for new trial. Affirmed.

Albert D. Flor, of New Ulm, and Cobb, Wheelwright, Hoke & Benson, of Minneapolis, for appellant.

Daniel F. Foley, of Minneapolis, for respondent.

DIBELL, J.

Action on a bond given to guarantee the fidelity of one Jackson, at first the cashier and later the president of the plaintiff bank. There was a verdict for the defendant, and the plaintiff appeals from the order denying its motion for a new trial.

1. In 1914 the defendant executed a bond agreeing to—

"reimburse the employer [plaintiff] to the extent of the sum of $10,000, and no further, for such pecuniary loss of moneys securities, or other personal property belonging to the employer, as the employer shall have sustained by any dishonest act or acts committed by the employé [Jackson] in the performance of the duties of the office or position in the service of the employer hereinbefore referred to or of such other office or position as the employé may be subsequently appointed to or called upon to fill by the employer."

The bond contained a provision for its continuation from year to year, and it was continued to and including 1922. Prior to each continuation the bank signed a certificate in substantially the following language:

"To Fidelity and Deposit Company of Maryland: This is to certify that to the best of my knowledge and belief, since the issue of the above bond Mr. J. C. Jackson has faithfully, honestly, and punctually accounted to me for all moneys and property in his control or custody, as my employé, has always had proper securities and funds on hand to balance his accounts, and is not now in default to me."

One condition of the bond was:

"That the employer, on becoming aware of any act which may be made the basis of any claim hereunder, shall immediately give the company notice thereof in writing, by a registered letter."

Another was that the bank should file with the company its itemized and verified claim within 90 days after becoming aware of such act, and that suit should be brought within 12 calendar months after it became aware thereof.

Another condition or provision was that the bank should make a complete inspection of the accounts and books of its employé at least once in every 12 months from the date of the bond; such inspection to include the examination of all cash and securities of which he had custody or charge.

The evidence supports the plaintiff's claim that in 1922 and prior years Jackson misappropriated the funds of the bank in large amounts by taking to his own use moneys coming to the bank in payment of mortgage loans and continuing to carry them on the books of the bank as live assets. If the jury so found, and for the purposes of this appeal it must be assumed that it did, the plaintiff should recover, unless one or more of the defenses available under the terms of the bond were submitted to the jury under proper instructions, and upon sufficient evidence, and found adversely to the plaintiff. It is conceded that in 1922, and for a long time prior, Jackson habitually overdrew his account at the bank. The making of a check with intent to defraud, knowing that the maker has not sufficient funds in or credit with the bank to pay it, is made an offense; and the making of such is prima facie evidence of an intent to defraud. G. S. 1923, § 10361.

On November 20, 1922, the bank was aware of misappropriations by Jackson who on that day resigned. It had suspicion before, and perhaps notice suggesting an inquiry which would have led to a disclosure. It is not disputed that it knew all along for years that Jackson overdrew his account. It was a matter of concern. There was an effort to remedy the situation. It may be inferred that the bank was much a one man institution, and Jackson the man, that the bank directorate exercised little oversight or control, and that the president did as he wished with the affairs of the bank.

After charging in detail upon the issues, the court summarized the conditions under which the plaintiff could recover:

"If you find, under the rules given you...