Bank of Rose Hill v. Graham

CoNNok, J. The determinative question involved in this appeal is whether, after the execution of the bond sued on in this action, and while the same, according to its terms, was in force, the plaintiff, Bank of Rose Hill, as employer of John A. Bannerman, its cashier, made a settlement with its said employee of the loss which it had sustained by reason of his default, and which might have been made the basis of a claim under the bond against the defendant, the Fidelity and Deposit Company of Maryland, the surety thereon. If this assistant cashier was authorized to make the settlement with its cashier, for the loss which the plaintiff had sustained by reason of the latter’s default, then the settlement as found by the referee was made by the bank, and by reason of the stipulation and provision contained in section 6 of the bond, the bond was void from the beginning, and the surety is not liable to the *535 obligee for any default of tbe principal, without regard to whether such default occurred before or after the execution of the bond. The facts with respect to the loss, and also with respect to the settlement, were found by the referee, and are fully set out in his report. There was no exception to these findings of fact. A finding of fact made by the referee, in the absence of an exception thereto, was conclusive on the hearing in the Superior Court, as it is on the appeal to this Court. The settlement of the loss which the plaintiff had sustained by reason of the default of its cashier was made with said cashier, by the assistant cashier of the plaintiff. The assistant cashier did not undertake to compromise plaintiff’s claim against the cashier for the amount of the loss. He demanded and received payment in full of the claim. Upon all the facts found by the referee in this case, the assistant cashier was authorized to make the settlement, which he did in good faith, and in the interest of the bank. Under the express provision of the bond, the settlement without the consent of the surety rendered the bond void from the beginning and released the surety from any and all liability thereunder to the obligee. At the date of the settlement with him John A. Bannerman was the cashier of the plaintiff bank only in name. He had ceased to be the active cashier, and his duties and powers had devolved upon the assistant cashier, pending the election and qualification of his successor. Upon his discovery of the shortage in the account of a customer of the bank, which had occurred while the cashier was in active charge of the bank, it was the duty of the assistant cashier to demand and insist upon a settlement of the loss which the bank had sustained by the shortage. This he did in good faith. The money which he received in settlement of the claim against the cashier, was promptly applied to the payment of the loss. The failure of the assistant cashier to report the loss and the settlement to the directors did not affect the validity of the settlement. Upon the express provision of the bond, the effect of the settlement was to render the bond void from the beginning and to release the surety from any and all liability thereunder to the obligee. There was no error in the refusal of the court to submit the issues presented by the plaintiff, based upon its exceptions to the report of the referee, to the jury. These issues involved only matters in controversy between the plaintiff and the surety. As there was no error in the judgment that plaintiff in no event is entitled to recover in this action of the surety, the answers to the issues are immaterial. The judgment is Affirmed.