Gamble-Robinson Co. v. Mass. Bonding & Ins. Co.

• Decision Date: 16 December 1910
• Citation: 129 N.W. 131,113 Minn. 38
• Parties: GAMBLE-ROBINSON CO. v. MASSACHUSETTS BONDING & INS. CO.
• Court: Minnesota Supreme Court

113 Minn. 38

129 N.W. 131

GAMBLE-ROBINSON CO.

v.MASSACHUSETTS BONDING & INS. CO.

Supreme Court of Minnesota.

Dec. 16, 1910.

Appeal from Municipal Court of Minneapolis; E. F. Waite, Judge.

Action by Gamble-Robinson Company against the Massachusetts Bonding & Insurance Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Syllabus by the Court

Appellant was informed by the written cash reports of its employé, a traveling salesman, that he was indebted to the company in the sum of $553.21, and received from him $25 on account, with the statement that there were credits and discounts due him sufficient to balance the account. During the succeeding three weeks appellant caused the books to be checked up and the accounts of the customers to be examined, to determine the correctness of his report and the existence of the discounts and credits claimed; but for the period of four weeks thereafter nothing special was done in that direction. The employé continued in appellant's employment in another locality, and made three payments of $25 each out of his own salary to apply on his account. It was then discovered that he had collected an account which had never been reported, and he was discharged, and the bonding company notified of the shortage.

In an action against the respondent bonding company to recover the amount of the shortage, held, that the delay to notify respondent of the facts was unreasonable, and not in accordance with the provisions of the bond, which provided that the insurer should indemnify the employer for pecuniary loss sustained by reason of the fraud or dischonesty of the employé, and required that upon discovery of any act of fraud or dishonesty the employer should immediately give notice thereof to the bonding company. Walter Holsinger, for appellant.

Brown, Albert & Guesmer, for respondent.

LEWIS, J.

The Gamble-Robinson Company was a corporation engaged in the fruit commission business at Minneapolis. Appellant, Gamble-Robinson Company, was an associate corporation engaged in the same business at Rochester, Minn.; the officers of both corporations being identical, all residing at Minneapolis. This action was brought to recover $499 from the respondent, claimed to be the amount of shortage in an account of an employé, W. J. Frisbee. The surety bond provided as follows: ‘At the expiration of three months next after proof satisfactory to the company, as hereinafter mentioned make good and reimburse to the said employer such pecuniary loss as may be sustained by the employer by reason of the fraud or dishonesty of any or either of the employés named upon said schedule, or added thereto as hereinafter provided in connection with his duties as specified on said schedule, amounting to embezzlement or larceny: * * * Provided, that on the discovery of any such fraud or dishonesty as aforesaid on the part of any employé, the employer shall lmmediately give notice thereof to the company, and that full particulars of any claim made under this bond shall be given in writing addressed to the company, at its office in the city of Boston, Mass., within sixty days after such discovery as aforesaid [Folios 16-18]. * * * If the employer shall fail to notify the company of the occurrence of any act of dishonesty on the part of any of the employés as soon as it shall have come to the knowledge of the employer, or shall continue to intrust the employé with money or valuable property after such discovery, or makes any settlement with the employé for any loss hereunder without the consent of the company, or condones any act for which the company may be liable, then the company shall be discharged from any and all liability under this bond as to such employés [Folios 21, 22].’ At the close of the trial the court directed a verdict for respondent, upon the ground that appellant had failed to notify respondent, within a reasonable time after its knowledge, of the acts of dishonesty which Frisbee had been guilty of.

The rules of law governing such cases have been stated as follows: ‘The general rule is that the question of reasonable time is one of fact, and must be submitted to the jury with proper instructions; but when the facts are undisputed, and only one reasonable conclusion can be drawn therefrom, it is the duty of the trial judge to instruct the jury accordingly.’ Hormel & Co. v. American Bonding Co., 128 N. W. 12. If a bond is fairly and reasonably susceptible of two constructions, one favorable to the insured and the other to the insurer, if consistent with the objects for which the bond was given, that construction favorable to the insured must be adopted. Though the insured may have had suspicions of irregularities, or fraud, he is not bound to assume that an employé is guilty of acts of dishonesty until he has acquired the knowledge of such specific fraudulent or dishonest acts as might involve the insurer in liability for misconduct. American Surety Co. v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977. The object of giving such a notice is to enable the insured to take steps for its protection, and what is a reasonable time and what constitutes knowledge depends, of course, entirely upon the circumstances of each particular case. The object of such a bond is to indemnify the insured against loss arising from any act of fraud or dishonesty on the part of employés, and such object should not be defeated by any narrow interpretation of its provisions. But this rule should not be availed of to refine away the terms of the contract...