Shackamaxon Bank v. Yard

Opinion, Mr. Justice Williams: This action was brought upon a cashier’s bond. The defence made by the surety rests on his construction of the condition in the bond. It appears that one Thomas L. Huggard was elected cashier of the Shackamaxon Bank in 1873, and gave a bond to secure the faithful discharge of his duties, with Murphy as surety. It is clear that all the parties contemplated the establishment of permanent relations between the bank and its cashier. They knew that the office was an annual one, and that a bond in the ordinary form would impose no liability beyond the current year. They undertook, therefore, to provide against the necessity for an annual renewal of the bond, and to extend the security afforded by it so as to cover the whole period of Huggard’s service as cashier, by giving to the condition the following form: “ If the said Thomas L. Huggard shall for and during the time of his employment by said bank, whether under his present election or under any subsequent election to the said position, or whether under its present organization or charter or under any renewals or extensions thereof, discharge and fulfil with integrity and fidelity the trust,”-etc. The bank relied on the bond in this form and did not require its renewal, and Huggard remained in the employment of the bank, as its cashier, down to the time of its disastrous failure in 1885. A course of fraudulent conduct was entered upon by him, as we understand the evidence of Mr. Faunce the expert accountant, in 1877 or 1878, which continued until, and which grealty contributed to, if it did not occasion, the final collapse. Sometime after the bank was closed, this action was brought upon the cashier’s bond and the surety asks to be relieved from his undertaking because the evidence does not show a formal re-election of his principal year by year to the office of cashier. The learned judge of the court below thought the position well taken, holding that “ the phrase under the present election or under any subsequent election” should be understood as restricting, rather than enlarging the preceding clause “ during [147] the time of his employment by the said bank ; ” and that, to render the surety liable, a formal re-election annually must be shown by the plaintiff. Our inquiry, then, in the first place, is whether the words referred to are restrictive or enlarging in their operation, and next, whether a formal re-election is necessary in order to continue the liability of the surety. The condition was intelligently framed. The scrivener seems to have been aware of the general doctrine affecting the liability of sureties on official bonds, as laid down in Addison on Cont., 1117, and as applied in the Manuf. & M. S. & L. Co. v. O. F. Hall Ass’n, 48 Pa. 446. Instead, therefore, of making the bond relate to the term to which Huggard was elected, he used the words “during the time of his employment by the said bank” as cashier. Then, as if apprehensive that those words might also be restricted to the term to which Huggard had been elected, he added the further words, for the express purpose of enlarging the scope of those previously employed, “ whether (such employment shall be) under his present, election or under any subsequent election to the said position.” The fear seems then to have suggested itself that even these words were not broad enough, because they might be held to be limited to the present charter. He then adds, to relieve against this danger, the further words, “ or whether under its present organization or charter, or any renewals or extensions thereof.” The object of these explanatory sentences was to relieve against the fear that the previous words might be held to relate to the present term of Huggard, or to the present form of organization under the existing charter of the bank, and by express words to so enlarge the condition as to exclude such interpretation of it. In this form it was intended to protect the bank during the time of Huggard’s employment as cashier, and during the existence of the bank, though acting under a renewal or extension of its charter at the time a breach should occur. In this form it was executed by both principal and surety and accepted by the bank. The purpose to make the bond impose a continuing liability and relieve against the necessity for annual renewals was a lawful one, and the words employed for that purpose are apt and sufficient. The question is not new or barren of authority. In Mayor of Berwick v. Oswald, 3 E. & B. 653, a person was elected bor [148] ough treasurer, which was then an annual office. He gave bond for the faithful performance of his duties as treasurer “ during the whole time of his continuing in said office, in consequence of the said election or under any annual or other future election to the said office.” The bond was given in 1842. He held the office until 1848. The term had been changed meantime so that it became an office to be held during the pleasure of the borough councils, instead of an annual one. The default occurred after the change of the term and the appointment of the treasurer for an indefinite term. The surety pleaded these facts as a defence, but the court regarded them as insufficient, and held that the surety was liable for the default occurring after the change in term of office and while the treasurer was holding under an appointment made after such change had taken place. The same question was raised in Mayor of Dartmouth v. Silly, 7 E. & B. 97,“ and the same rule was held. It may be regarded as settled that the obligation of a bond for the faithful discharge of the duties of an office or an employment is co-extensive with the duration of the office or employment. If the office is for life the liability of the surety will continue during the life of the incumbent. If the term is indefinite, as during good behavior or at the pleasure of the employer, the liability of the surety is indefinite and will continue until the will of the employer is exercised and the term ended: Addison on Cont., § 1118. Substantially the same rule was applied in Coe v. Vogdes, 71 Pa. 383. The action in that case was against the surety of a tenant who had held over and was in arrears for rent. The lease was for one year, but contained a stipulation that if the tenant should remain in possession after the end of the term, the lease should “ continue for another year, and so on from year to year until legal notice is given for a removal.” The sureties signed a stipulation agreeing to be liable for the performance of the lease on part of the tenant. The rent for the first year was paid, but the tenant held over and the sureties were notified. They thereupon gave notice that they would not be further liable, and the tenant paid to the end of the then current year. The action was for rent accruing during a subsequent year. The sureties replied, first, that they were only liable for the original term of one year; and next, that after the year expired they had given no [149] tice of their refusal to be bound. They were held liable for the tenant’s performance, not only during the first year, but during the holding oyer; and this court said that “ a mere notice by a surety that he would not be liable was no defence ; he could not dissolve the contract at pleasure.” The remaining question is, was Huggard still in the employment of the bank as cashier when the default sued for occurred ? It is conceded that he was acting as cashier at the time, and that it was because of that fact that it was possible for him to inflict the injury complained of. It is conceded, also, that the bank recognized and accepted him as its cashier, trusted him with the custody of its funds, paid him his salary, and held him out to the world as such. He could not deny his official relation to the bank, nor could the bank disavow or repudiate his acts done in their service within the scope of a cashier’s authority. As Huggard and the bank employing him are concluded by their conduct, both as to the public and each other, the surety, standing on the same ground with his principal so far as the writing is concerned, is also concluded. The employment of the principal as cashier with the position and emoluments legitimately belonging to the office was the object of the bond. This object was secured and the principal was for twelve years in possession of it. If the action of the directors was irregular, the irregularity was never taken advantage of. If his title to the office lacked authentication by the record of a formal election, nobody ever questioned his right or suggested a doubt about his powers. If either he or the bank could have set up want of an annual re-election as an excuse for terminating the relation between them, neither did so, but both waived the want of form and continued the official relation. No form of election is provided for by the statute, and none is made necessary by the bond. So far as the liability of the principal or surety on this bond is concerned, continuous service, beginning in a formal election and extended by mutual consent with the acquiescence of all parties interested, is enough. The judgment of the court below is now reversed, and judgment is now entered on the points reserved in favor of the plaintiff.