Franklin Bank v. Stevens

Rice, J. -— This case is presented on two bills of exceptions. The first bill was filed and allowed at the August Term of the Court, in 1854. The complaint in this bill is, that the words “ to abide,” which had been entered upon the ■docket, under this action, at some preceding term, were, on motion of the plaintiffs, stricken off by order of the presiding JudgeEntries made upon court dockets by consent of parties, under the direction of the Court, merely to facilitate business, are subject to the direction of the Court. They are designed to relieve parties from unnecessary inconvenience and costs, and to promote the despatch of public business. Of this character are the entries “ to become nonsuit,” “ to be defaulted,” “to continue,” “to await,” “to abide,” and the like. Such entries will always be observed by the Court, and ordinarily enforced according to their terms. But when it becomes manifest to the Court that they have been made under a misapprehension of facts, or, when by a change of circumstances the rights of parties would be sacrificed by a rigid enforcement of such orders, and justice thereby defeated, the Court may properly discharge or modify them. Such entries are under the control of the Court, to be determined as matter of discretion, upon the peculiar circumstances of each case. To the exercise of that discretion — 538 — exceptions do not lie. These exceptions must therefore be dismissed. As to the second bill of exceptions; the defence was placed upon the ground that the bond was void, because it was obtained from the defendants by fraud, and by the suppression and concealment of material facts and circumstances affecting their liability, known to the plaintiffs, or their authorized officers and agents, and not known to the defendants. There was evidence tending to prove that there had been great irregularity in keeping the books of the bank, by the cashier; that for two or three years before the bond in suit was executed, in which Hiram Stevens was cashier, no bonds for the faithful performance of his duties had been taken; that during the years in which the cashier was subsequently found to have been a defaulter to the bank, some of the directors had been guilty of negligence and misconduct in overdrawing their accounts, and that other irregularities existed in conducting the business of the bank. The Judge instructed the jury that even if the.authorized agents of the bank did know at the time the bond was taken, that bonds for preceding years had not been taken, or could not be found, they were not bound to communicate it to the sureties and that the omission of it would be no fraud, would not render the bond invalid, unless they also knew there was a deficiency or defalcation on the part of the cashier, and that the jury would not bo authorized to find the bond obtained by fraud for that cause; that the condition of the bond did not extend to the keeping of the books of the bank, or the cashier’s neglect or omission in that respect, at any time prior to its date, and that the directors and agents of the bank were not bound to communicate what information they might have on that subject, and that the omission to do it was no fraud on their part; and that the misconduct of the directors prior to the date of the bond, though it might render them liable to the stockholders, furnished no defence in this suit, unless it brought home to — 539 — them knowledge of an existing deficiency on the part of the cashier. In contracts of suretyship good faith is to be observed. If there be any misrepresentation or concealment in relation to any material part of the transaction, to induce the surety to enter into the obligation, the contract will be void. Thus, if a principal, knowing that he had been cheated by an agent, should apply for security for the good conduct of the agent, and conceal such fact, and any one in ignorance thereof should become surety for the agent, it would bo void. Maltby’s case, 1 Dow. Parl. Cases, 294. In the case of Jackson v. Duchaire, 3 T. R., 552, where a "widow in straitened circumstances, took a house upon terms that she was to take the furniture of the preceding tenant, at a valuation, provided she could raise the money within a given time, and a third party came forward upon the understanding that the price to be paid by her for the furniture had been settled at £10, and became responsible for the payment of that amount, but it afterwards appeared that there had been a secret understanding between the widow and the parties, that the real price was to bo £100, and that the widow had given two promissory notes to secure the payment of the additional £30, the existence of which, as well as the underhand agreement, had been kept back from the third party; it was held that the transaction was a gross fraud upon the latter, and that the plaintiff could not recover for that reason. In the case of Pidlock v. Bishop, 5 D. & R. 609, and in Stone v. Compton, 5 Bing. N. C. 142, the same principle was fully recognized. It is more difficult to determine what will constitute a material part of a transaction, in relation to which misrepresentation or concealment will be deemed fraudulent. It is apparent that to be thus material, it must be some fact or circumstance immediately affecting the liability of the surety, and bearing directly upon the particular transaction to which the suretyship attaches. There are many facts — 540 — and circumstances which may indirectly affect the liability of the surety, such as the skill, or want of it; the industry, or -indolence; the care, or negligence; the wealth or poverty of the party for whose faithfulness or responsibility a surety is sought, to which this rule will not apply. Such facts and circumstances are too remote to constitute elements to be deemed material in transactions of this kind, unless they are made such by particular inquiry and distinct representation. The effects which result from such personal qualities are matters for which the surety ordinarily assumes the responsibility. It is the province of the Court to determine the competency of testimony, and the jury to determine its weight. The bond in suit contains this provision, in addition to those ordinarily incorporated in cashiers’ bonds; “and shall account for all notes, drafts and moneys, drafts, notes and property heretofore intrusted to his hands and possession as cashier of said bank, since he has held the said office of cashier of said bank.” This provision does not render the sureties liable for the unskillful or negligent manner in which the books of the bank had been kept, nor for the negligence of the directors, nor the acts of the bank commissioners. It simply stipulates that the cashier shall account for the property of the bank, which had before that time been intrusted to his hands. Whether the property or any portion of it had been lost by the cashier, and if so, whether the officers of the bank had knowledge of that fact, were material facts, which had a direct bearing upon the liability of the sureties. Upon this point the instructions are distinct and accurate. So too as to the existence of former bonds. The existence or non-existence of such bonds can have no effect upon the defendants’ liability. If such bonds were in existence, the sureties in this could not compel the bank to resort to them. They did not stipulate to become liable in case former bonds were found insufficient. But they undertook absolutely that the cashier should account for the funds in — 541 — bis bands. Tbo terms of the contract clearly indicate the character and extent of the liability. The jury were also instructed that if the bond was obtained from Cooper (a co-surety) by fraud, so that it was inoperative against him, it would not for that reason be invalid against the defendants, unless there was evidence that the signatures of the defendants were to be made on condition that Cooper had or should sign. It is contended that this intimation is erroneous. In the case of Keyser v. Keene, 17 Penn. State R., (5 Harris,) 327, a bond had been prepared for six persons to sign, and contained a declaration that the obligee had become surety for another, on the agreement of the six to indemnify him, but the bond was executed by five only. Held that the bond being delivered, was obligatory on those by whom it was executed. In the case of Martin v. Stribbling, 1 Spears, (S. C. R.,) 23, it was held that it is no discharge of a surety that he expected a third person would also sign as surety, and that such third person would receive from the principal certain books and papers as an indemnity for the suretyship, unless it is shown that the surety stipulated that the paper should not have effect until one or both those things were done; or that the signature of the surety was obtained by means of fraudulent representations, that such third person would sign the notes, and that the principal would place in his hands his books and papers, to be by him collected and applied in payment of the debt. There was no evidence that the execution of the bond by the defendants in any way depended upon the fact that Cooper should also sign, or that any representations were made to them in relation to the fact, whether Cooper would or would not sign. Many cases illustrating the law of insurance were cited at the argument, by counsel for the defendants. Though the two classes of cases may be in some respects analagous, yet they are not sufficiently so to render the dicta of Judges, or — 542 — tbe rules adopted by courts in one class, authority in the other. No error is perceived in the instructions given, or other proceedings at the trial. Exceptions overruled, and judgment for the amount reported by the auditors. TenNEY, J., was unable to attend at the hearing, and took no part in the opinion.