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National Surety Corp. v. Clement

Decided: April 19, 1945.

NATIONAL SURETY CORPORATION, A CORPORATION, PLAINTIFF-RESPONDENT,
v.
CHARLES H. CLEMENT, DEFENDANT-APPELLANT



On appeal from the Bergen County Circuit Court.

For the plaintiff-respondent, Glickenhaus & Glickenhaus (Hugo Woerner, of counsel).

For the defendant-appellant, Chandless, Weller & Kramer (Ralph W. Chandless, of counsel).

Brogan

The opinion of the court was delivered by

BROGAN, CHIEF JUSTICE. This is defendant's appeal from a summary judgment entered against him after his answer was struck out by the learned trial judge. The complaint

avers: that the plaintiff, surety company, on April 25th, 1941, executed its bond to a partnership known as Kaplan Brothers, which obligated it to indemnify the partners against any loss arising out of larceny, embezzlement, misappropriation, willful misapplication, or other dishonest act by one or more of its employees; that while said bond was in effect the partnership employed the defendant as a salesman and that subsequently he received for the account of the partnership the sum of $2,500 which he appropriated to his own use; that the plaintiff, surety company, made good this loss to the partnership. Further, that the defendant, prior to the delivery of the said bond to the partners, executed an indemnity agreement with the surety company in which he agreed to compensate it for any loss it might sustain in his behalf, in consequence of having written the bond in question. It also alleges that it paid a claim, filed by the Kaplan Brothers in the amount of $2,500, which sum defendant had received for the account of Kaplan Brothers, but which sum defendant had converted to his own use; that the defendant has not reimbursed the surety company and demand is made for the amount due.

An answer was filed in which, among other things, the defendant pleaded that he had no knowledge that the surety company had entered into bond with the said partners to indemnify them against loss as the complaint alleged; and that he had no knowledge that the said bond was in force and effect. He denied he was an employee but asserted that he was a partner. He denied the misappropriation of the sum specified; denied that the surety company had reimbursed the partnership and said further that if he executed any indemnity agreement it was not applicable to the several allegations of the complaint; and he further denied the truth of the plaintiff's allegation that he, the defendant, had not paid the surety company the said sum of $2,500. Under the head of affirmative defenses he pleaded that he and Kaplan Brothers had entered into a partnership arrangement as a result of which they were indebted to him in large sums of money for which they failed to account and, further, that he had filed a bill in the Court of Chancery against Kaplan

Brothers for an accounting which suit he says was "terminated by agreement between the parties."

The answer was challenged on the ground that it was frivolous "in that it did not set forth a defense to the said action." Accompanying the notice which was served on counsel for the defendant was an affidavit of the vice-president of the plaintiff corporation which contained a complete, particularized verification of each and every material allegation in the complaint as well as this statement: "The defendant did not request the plaintiff to litigate the claim (i.e., the claim of Kaplan Brothers v. the bonding company) nor did he deposit or offer to deposit with plaintiff collateral satisfactory to it in kind and amount." The significance of this averment in the affidavit will presently appear. Attached to the affidavit was defendant's application for a fidelity bond, in which an agreement of indemnification was contained, signed by the defendant on April 24th, 1941, one day prior to the date of the surety company's bond in favor of Kaplan Brothers. Therein the defendant stated that he was an employee of Kaplan Brothers. The answers made by him to questions on the application for bond disclosed his financial worth, his domestic situation, and the names of certain persons as references. The last part of this application contained the indemnity agreement with the surety. By its provisions, among other things, the surety was given the right to adjust, settle or compromise any claim under the bond unless the applicant requested the surety to litigate such claim, in which event the applicant was obliged to deposit with the surety collateral satisfactory to it in kind and amount. That this agreement was executed by the defendant is not questioned. As a matter of fact, no answering proof was advanced by him.

The court determined that the defendant's answer "unsupported by affidavit, * * * is insufficient in law" and it was struck out. In the appeal certain objections against the order made by the learned trial judge are urged, to this effect; that the answer was not frivolous; that the court should not have entertained the plaintiff's motion; that it was without jurisdiction to strike ...


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