Ralph Hegman Co. v. Transamerica Ins. Co.

• Decision Date: 16 June 1972
• Docket Number: No. 43222,43222
• Parties: RALPH HEGMAN COMPANY, Respondent, v. TRANSAMERICA INSURANCE COMPANY, Appellant, Larkin Mergenthal, Defendant.
• Court: Minnesota Supreme Court

Page 555

198 N.W.2d 555

293 Minn. 323

RALPH HEGMAN COMPANY, Respondent, v. TRANSAMERICA INSURANCE COMPANY, Appellant, Larkin Mergenthal, Defendant.

No. 43222.

Supreme Court of Minnesota.

June 16, 1972.

Syllabus by the Court

1. Under Rule 26.04, Rules of Civil Procedure, the deposition of a party may be used by an adverse party for any purpose, and in the absence of a party his deposition may be used at a trial.

2. When the deposition of a witness is offered at a trial, the determination of the competency of the witness lies within the discretion of the trial judge.

3. In a civil action, where a party defendant refuses at a deposition to answer questions on the ground that such answers may incriminate him, the deposition may be received at a trial in the absence of the party over the objection of a codefendant surety that it is prejudicial.

4. Evidence found sufficient to justify a jury in finding liability under 'Fidelity One Act Grain Bond.'

Meagher, Geer, Markham & Anderson and O. C. Adamson, II, Mark Stageberg, and James F. Roegge, Minneapolis, for appellant.

Arthur D. Walsh and Gordon J. Berg, Minneapolis, for respondent.

Heard before KNUTSON, C.J., and ROGOSHESKE, TODD, and GUNN, JJ.

WILLIAM D. GUNN, Justice. ^*

Defendant-appellant, Transamerica Insurance Company, issued a 'Fidelity One Act Grain Bond,' i.e., a special employee fidelity bond, on codefendant Larkin Mergenthal, ¹ who at the time the bond was issued was an employee of Ralph Hegman Company, plaintiff-respondent. During Mr. Mergenthal's tenure as a grain elevator manager for the plaintiff corporation, apparent shortages developed. Plaintiff corporation thereafter filed a claim for reimbursement from Mergenthal and the appellant insurer; these claims are the subject of this lawsuit. The court, sitting with a jury, gave judgment for the plaintiff against Transamerica for an amount equal to the limit of its obligation under the bond.

Transamerica raises two issues on appeal: (1) Whether the use of the Larkin Mergenthal deposition was proper at the trial; and (2) whether there was sufficient evidence introduced to support a claim under the terms of the fidelity bond.

1--2. As to the use of the deposition, we find that it was properly introduced and received in the absence of defendant Mergenthal, as the deposition of a party may be used by an adverse party for any purpose. Rule 26.04, Rules of Civil Procedure. The witness' lack of competency, due to fatigue, was also cited as an objection to the admissibility of the testimony in the deposition. The determination of the competency of a witness lies within the discretion of the trial judge, State ex rel. Dugal v. Tahash, 278 Minn. 175, 153 N.W.2d 232 (1967); and when a deposition is sought to be introduced, the determination of the competency of the witness should be treated in the same manner. Rule 26.05, Rules of Civil Procedure.

3. Another objection to use of the deposition is that Mergenthal on several occasions refused to answer questions relating to his alleged dishonesty or fraud on the ground that the answers might incriminate him. Appellant argues, therefore, that the use of the deposition prejudiced its cause by presenting non-evidence from which the jury should not have been permitted to draw adverse inferences. To support its contention, appellant cites a number of cases from other jurisdictions.

With the exception of United States v. 5 Cases, 179 F.2d 519 (2 Cir. 1950), the cases cited are criminal cases. The authorities generally distinguish between civil and criminal actions in considering this issue. Minnesota decisions in criminal cases, like those in most states, hold that it is usually prejudicial error for the prosecution to call a witness if the prosecutor knows that the witness will assert his Fifth Amendment privilege and thereby reflect adversely upon the defendant. See, State v. Jones, 277 Minn. 174, 152 N.W.2d 67 (1967), and cases cited therein. In civil cases, a different rule has been applied in Minnesota and elsewhere. See, Allen v. Lindeman, 259 Iowa 1384, 148 N.W.2d 610 (1967); Christenson v. Christenson, 281 Minn. 507, 162 N.W.2d 194 (1968); Molloy v. Molloy, 46 Wis.2d 682, 176 N.W.2d 292 (1970). The inference that may be drawn from invoking the privilege of the Fifth Amendment is not limited to those cases where the party claiming the privilege is seeking affirmative relief. Molloy v. Molloy, Supra.

In this case the party prejudiced by disclosure of the Fifth Amendment claim is not the party who asserted the privilege. However, appellant had agreed to indemnify plaintiff against loss resulting from dishonesty or fraud on the part of Mergenthal. It had, therefore, assumed certain responsibility for Mergenthal's acts of the kind involved herein. If the jury could properly have been permitted to draw inferences in favor of plaintiff against Mergenthal because of his assertion of privilege on its claim against him, there seems no sound reason why the jury should not be permitted to draw the same inferences in considering the substantially identical claim of plaintiff against appellant. The rule is stated thus:

'Statements of a principal, made as a part of an act or transaction for which the surety held himself liable, are admissible as admissions against the surety.' 7 Dunnell, Dig. (3 ed.) § 3414.

See, also, the cases cited under note 57 therein. Among those cases, Farmers Coop Exch. Co. v. U.S. Fidelity & Guaranty Co., 150 Minn. 126, 184 N.W. 792 (1921), and Ceylon Farmers Elev. Co. v. Fidelity &...