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Hoboken Camera Center Inc. v. Hartford Accident and Indemnity Co.

Decided: January 23, 1967.

HOBOKEN CAMERA CENTER, INC., PHOTOPOOL, INC., CONSOLIDATED DISTRIBUTING CORP., SHOPPERS WORLD CAMERA CENTER, INC., MULTIPOOL, INC., AND KAYE CAMERA EXCHANGE, INC., PLAINTIFFS-APPELLANTS,
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY, DEFENDANT-RESPONDENT



Conford, Foley and Leonard. The opinion of the court was delivered by Conford, S.j.a.d.

Conford

This is an action on a blanket position bond (employee fidelity insurance) covering three camera stores formerly operated by plaintiffs in Duluth, St. Paul and Minneapolis, all in Minnesota. Plaintiffs sued to recover losses aggregating $42,705.22, broken down to $13,752.20 at Duluth, $13,079.16 at St. Paul, and $15,873.86 at Minneapolis. All losses are alleged to have been sustained between July and September of 1962. The trial court granted judgment for defendant on a motion for judgment based upon a factual "Stipulation" entered into by the parties.

Plaintiffs rely for proof of the amounts of the losses stated upon inventory control records kept upon the "perpetual inventory" basis. Information concerning specific incidence of employee dishonesty is found in the record in two sources: (a) the stipulation aforesaid and (b) an affidavit and certain depositions and answers to interrogatories which were before the court on a previous motion by the defendant for summary judgment which was denied.

The insuring agreement is of a standard type, running for one year from October 31, 1961. It covers "any loss of money or other property which the insured shall sustain through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others," with a limitation of $10,000 on each employee, and subject to a "Deductible Amount" of $250 for each loss by acts or defaults of any employee.

The agreement contains in section 2 of the "Conditions and Limitations" an "Exclusion," reading as follows:

"SECTION 2. This Bond does not apply to loss, or to that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of money or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees."

The stipulation afore-mentioned reads, in material part, as follows:

"The plaintiff stipulates that it would offer in evidence, on the subject of damages, the following:

1. Testimony by one Sanford Hoffman, assistant store manager, that on or about October 4, 1962, he gave to Jerry Brown, plaintiff's employee, the sum of $99.96 petty cash from the cash register of the camera department in Shoppers' City, Duluth, Minnesota. He further gave to the said Jerry Brown, the sum of $6.52 representing a portion of the day's receipts, instructing Jerry Brown to deposit both sums to plaintiff's bank account. The said Jerry Brown only deposited the sum of $6.52 and failed to deposit or otherwise account for the sum of $99.96.

2. Testimony by Sanford Hoffman that on a relevant date close to closing time, he observed 2 cameras locked in a glass case. On the following morning he observed that both cameras were missing. No record of the sale of these cameras was present or in fact ever reported. Inquiry by him of every employee present on the previous evening was made, but each employee denied knowledge as to the whereabouts of the cameras.

3. Testimony of Dorothy Nelson that on a relevant date, Michael Stuppy, plaintiff's employee, stated that he had removed the sum of

$70.00 from the cash register to be used to pay the wages of employee William Jackson. Dorothy Nelson will further testify that at the time the statement was made, salary payments were made by check from the plaintiff's Hoboken office and that no payments of salary were ever made in cash.

4. Introduction into evidence of inventory control books, shipping records, inventory receipts, sales receipts, bills of sale and purchase receipts together with other documents relative to the keeping of inventory records.

5. Testimony by Margaret Theisen, plaintiff's bookkeeper in its Hoboken office, validating inventory control system as established by the aforesaid books and records. Testimony by the said Margaret Theisen that an analysis of the inventory control records revealed losses of a value of $42,705.22.

The plaintiff further stipulates that except as set forth above, no evidence will be introduced establishing the amount of the plaintiff's loss.

It is stipulated that the amount of the losses sustained under paragraphs 1, 2 and 3 hereinabove would not exceed $250.00 as to any single loss." (Emphasis added)

I

It was not entirely clear to us whether this stipulation was intended as plaintiff's exclusive probative reliance for the fact of loss and of employee dishonesty as the cause thereof, as well as for the amount of any such losses. Upon inquiry by the court after argument we were informed by plaintiff that the intent was solely as to amount of loss, the purpose being to elicit a ruling by the court as to whether the exclusionary clause would necessarily bar the action if plaintiff had no proof of the amount of the loss beyond the sums mentioned in the proffer of proof in the stipulation. If, on the other hand, the ruling favored plaintiff it would go to trial and adduce additional proofs, including expert accounting opinion, in support of the thesis that the inventory shortages were the product of employee dishonesty rather than any possible alternatives such as accounting error, larceny by outsiders, shoplifting or the like.

Although defendant disputes plaintiff's construction of the stipulation, we resolve this disagreement in plaintiff's favor for these reasons. The ...


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