Franklin Bank v. Cooper

lío action can bé maintained against tile surety upon a bond given by tile cashier of a bank, -which purports to secure the bank against previous delinquencies of the cashier, if the agents of the bank had knowledge of such default, and it was unknown to the surety, and they neglected to inform him, having a reasonable opportunity to do so, before the execution of the bond. Where the surety in such action claims exemption from any responsibility on account of a fraudulent conceabnent of facts affecting the risk by the agents of the bank, which concealment may be proved by facts and circumstances, no one of which of itself would be sufficient, but when combined with and explained by other evidence might satisfy the jury of its existence, although it should appear in the evidence: — 1st, That the surety did not call for information, nor see the officers of the bank after he was called upon to sign, and before the delivery of the bond, and the agent of the bank had not avoided giving the information. 2d, That the agent had only omitted to seek after the surety and volunteer unsolicited explanations. 3d, That knowing the defendant was to be the surety, and afterwards receiving his bond, without seeing him, when he was near at hand and could readily have been found; the proof of these facts will not authorize the Court to say to the jury that they overthrow the defence, as a rule of law. A request for certain instructions which cannot be given with legal propriety may be refused, and no exceptions lie because not given in a modified form. That a party has not been guilty of a fraudulent concealment of facts from another, cannot be assumed as a rule of law because the parties had no communication together verbalhj or in writing. Other modes of communication are common. A request for instructions which assumes a ground of defence to the suit which is not taken, may properly be refused. Thus, a request for an instruction, that defendant is not permitted to avoid his liability by proof that he did not understand the import of the bond, unless lie was induced by plaintiffs or their agents to suppose it was different from what it really was, may be refused, when the defence is, not that he did not know the import of the bond, but that facts material to the risk were concealed from him. Declarations of the officers of a bank when made to a party transacting- business with them in their official capacity, are admissible in evidence. But declarations made by the president of a bank, when not acting- in Ms official capacity, respecting its past iramaations, are not admissible. Whether a surety on an executor’s bond can be discharged, so as to make him a competent witness for the executor, without notice given by the probate court; quere.

ON Exceptions from Nisi Prius, Rice, J., presiding. Debt, upon a cashier’s bond. The defendant’s testator was one of the sureties. The instrument being lost, its contents were proved by a copy. It was dated Oct. 1, 1847, and with the usual conditions in such bonds, contained the following, — 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. Evidence was produced of the loss of the funds of the bank to a large amount, but prior to the date of the bond. The bank charter expired Oct. 1st, 1849, but by special Act of June 9, 1849, was authorized to continue its corporate capacity to Oct. 1, 1851, for the purpose of collecting its debts, and the corporation was authorized to choose three trustees, with power to prosecute and defend in the name of the bank any suits at law or equity. The Act was accepted Oct. 22, 1849, and John Otis, Stephen Tonng, and Joseph Eaton were chosen trustees by whom this action was prosecuted. Otis was president of the bank in 1847, and continued sucli to its close and bad been one of the directors for many years. Eaton had been one of the directors for some years, up to 1847, and the defendant’s testator had likewise held the same office several years prior to the acceptance of the bond. The defence was, that facts material to the risk were known to the president and directors of the bank, which were not known to the testator; which were not communicated to him, but were concealed from him, and that the bond was obtained by fraud. Much evidence was introduced tending to prove and also to disprove that the president and directors had knowledge before the bond was executed, that the cashier was a defaulter. There was evidence tending to show that the books of the bank were badly kept ,• that different firms had largely overdrawn; that the bonds for two or three years previous to the one in suit were not found; that the cashier was called upon1 to give this one because the others could not be found, and that he said he would give one to cover the past, and named the testator as surety. Hiram Stevens, the cashier, was dead. The defendant offered Charles Cooper, (testator’s son,) as a witness, who was objected to, as he was a surety on defendant’s probate bond, but on the production of a copy of a petition to the Judge of Probate, and proceedings thereon, discharging the witness from his liability on the bond, and also a release from witness to himself, and a release from the executor to him, the Court allowed him to testify. By him were also proved certain conversations with Otis, which were objected to by plaintiffs but admitted. One conversation testified to was in Washington, in 1850, when the witness said that he charged him with fraud and corruption; that he told Otis that his father sent for Stevens, (the cashier,) while he lay sick, and he heard him, Stevens, tell him that he did not know the clause was in the bond when he signed it; that Stevens said the bond that was intended to be given was accepted; that Otis took it before it was signed; that the next day Otis came down and handed him another bond which he supposed was the same one which had been agreed to, and asked him to run over and get father and his brothers to sign it, and he would wait for him. He told him of his father’s astonishment and suspicion at the retrospective clause, and that it was the basest fraud, and the witness did not recollect that Otis made any reply. Another conversation testified to by this witness was in the spring of 1848, at the Franklin Bank, when he went to settle his father’s account. At that time witness had not seen the bond; asked Otis the condition of the bank and he said all would come out right, provided the overdrafts should be made good. If the overdrafts of W. & II. Stevens could be secured the defalcation would be made up; he said my father was on the bond, and if he would indorse this paper it would save all trouble upon the bond, and his object was to induce me to get my father to indorse it. I reminded him that my father would not be liable on the bond as it was given after the defalcation; he said father was a friend to Stevens, but made no other remark. The nest conversation testified to by this witness, was in July or August, 1849. “I met Otis in the street; there had a talk about bond and reference; called on him for a copy; told him I had found a retrospective clause, and that I was astonished at it; charged him with obtaining the bond by fraud ; told him my father said he did not know there was such a clause in the bond when he signed it, and it was a fraud on him; asked him how ho could reconcile it to his conscience to trap him into signing the bond; said he did not think he had done my father wrong; he had been on the bond in previous years, and they had neglected to take bonds three or four years, and father would have undoubtedly signed them if asked; he expressed some doubt about the validity of the bond; said father’s estate would never bo troubled; it was an offence in Stevens, and they could send him to the state prison at any time.” Eaton and Young were called as witnesses by plaintiffs, who testified that the defalcation of the cashier, or any deficiency in the bank, was unknown to them or to the directors so far as they knew, until after this bond was given. The evidence introduced bearing directly or remotely upon the grounds taken in defence was voluminous, and will readily be apprehended by the instructions given and requested at the trial. The jury were instructed that if at the time the bond was executed the cashier was a defaulter to the bank, and that fact was known to the president and directors of the bank, and by them concealed from defendant’s testator, such concealment would be a fraud upon him, and would vitiate the bond; or, if the cashier was a defaulter at that time, and that fact was unknown to the defendant’s testator, but was known to the president and directors of the bank, and they neglected to apprise him of that fact, they having a reasonable opportunity to do so before he executed the bond, such neglect would be a fraud upon the testator, and would vitiate the bond so far as he was concerned. That if they were satisfied that defendant’s testator was a man of business, and well able to read the bond signed by him, it is a legal presumption that he knew and understood all the provisions therein contained; that James N. Cooper, (the testator,) being a director of the bank, it was his duty to know the condition of the books of the bank; that as a director he had the opportunity to know, and the law presumes he did know their condition, and that having sworn in their semi-annual returns to the Secretary of State, as to the state of the books, the law presumes he had such knowledge ; that it must be a knowledge of an actual deficiency, of facts material to the risk, and not the mere irregularity or want of posting up or keeping the books, the concealment of which would constitute a fraud — it must be knowledge, hot conjectural fears; that the inquiry was not what witnesses understood or represented Otis to say; but the fact, did the directors know of the defalcation. The plaintiffs’ counsel requested the following instructions, viz: — (The 1st and 2d are omitted as they were not relied upon.) 3d. If the jui’y believe that John Otis, president of the bank, had no communication with said James, verbally or in writing, touching his signing said bond before his signing tbe same, there is no ground for any presumption that said James N. Cooper was deceived or imposed upon by said Otis in obtaining his signature. 4th. If the jury believe the testimony of Joseph Eaton and Stephen Young, that the fact of the defalcation of said cashier, or the deficiency of the assets of said bank was unknown to them, or to the directors of said bank, or any of them, until long after the signing of said bond, defendant, in that case, can make no legal defence to plaintiffs’ recovering upon the same, although a defalcation or deficiency then actually existed. 5th. There is no evidence in this case, proving or tending to prove that the president, or any of the directors knew of a defalcation, or of a deficiency of the assets of said bank, prior to the execution of said bond of the first of October, 1847. 6th. That as Mr. Cooper did not call on Mr. Otis for information, nor see him after it was proposed by the cashier to procure his, (Cooper’s,) signature to the bond until he did sign it, and as there is not evidence of Otis having avoided giving any information ho had, there was not such opportunity for communicating information as that the want of doing it would constitute a fraud on said Cooper. 7th. That if the jury believe the testimony of Mr. Young, that the cashier, Stevens, proposed to procure, and knew the bond he was expected to procure, was to cover past years, Mr. Otis had a right to presume, that Stevens would not conceal its character from his sureties; and his, (Stevens’) concealment, if such were the fact, would not be a fraud on the part of plaintiffs. 8th. The omission to seek after and volunteer unsolicited explanations, under the circumstances, (if such they are found to be,) is not such fraudulent concealment as to vitiate the bond. 9th. Unless Cooper, when he executed the bond, was induced by the misconduct of the plaintiffs or their agent, to suppose the bond was different from what it really was, ho is not permitted to avoid his liability by proof, that he did not understand the import of the bond. The Judge refused to give any of these requested instructions. A verdict was returned for defendant. The plaintiffs filed exceptions to the rulings, the instructions and the refusals to instruct. in support of the exceptions, argued 1st, that Charles Cooper was not a competent witness. "When he was discharged it was done in probate court without notice. Chase v. Hathaway, 18 Mass. 222; Breed v. Pratt, 18 Pick. 115. Such a proceeding destroyed the right of appeal provided for in c. 105, § 25, K. S. 2. That the testimony as to conversations with Otis was improperly received. Otis was then but a director, and it does not appear he was employed about the business of the bank. He was doing no act. It was at most but a conversation between the witness and director about "a past transaction. Polley v. Ocean Ins. Co. 14 Maine, 141; Hartford Bank v. Hart, 3 Day, 491; McGill v. Hansford, 4 S. & B. 317. 3. The conversation in July, 1849, was not admissible. Otis was not trustee till the fall of 1849. Otis was then in the street, and there is no pretence he was doing any act in his official capacity. This testimony was calculated to prejudice the jury. 4. The third request should have been complied with; The jury were to inquire whether there was a concealment, or if there may have been an omission to state facts proper to be known as to the first breach, they should have been told there could be no concealment, if the parties did not come directly or indirectly together, and there was not the slightest evidence they ever did. The counsel further argued that the 6th, 8th and 9th requests should have been complied with. Cooper was a competent witness, having-been discharged from the executor’s bond, and mutual releases between Mm and the executor having been given. The statute requires no notice to be given. Dunham v. Branch, 5 Cush. 560; Ford v. Ford, 17 Pick. 418; Bryant v. Turner, 13 Mass. 391. When wanted as a witness surety may be discharged, c. 113, § 20, R. S. 2. The testimony was admissible. The trustees were appointed before the Act, which afterwards ratified rather than gave them their authority. The directors supposed themselves possessed of the required power, and the trustees performed the same duties before and since said act. 3. The requested instructions were properly withheld. The first three, with the fifth and sixth, called upon the Court to decide as matters of law, what was plainly for the jury as matter of fact. 1 Greenl. Ev. § § 44, 48 inclusive. The fourth was substantially given in chief. It forms no ground of exceptions that the instructions are not given in any precise form, provided those proper for the case are given in any form. Walcot v. Keith, 2 Foster, N. JEI. 196. The seventh was properly refused. The character of the bond was not the turning point in the case. The eighth assumes a ground of defence not taken by defendant, and as to the ninth, the defence was not put upon the ground that defendant’s testator did not understand the import of the bond. If the result of the whole charge is correct, though there may be errors in some particulars, there is no ground for a new trial. Gibson v. Stevens, 7 N. H. 352; Lyman v. Red-man, 23 Maine, 289; Brown v. Osgood, 25 Maine, 525. Although the statute does not require notice to discharge the surety, yet the common law does, according to the authorities cited. The vote appointing trustees was not until Oct. 1849 ; the conversation testified to was prior to that time. But I deny they were trustees in any sense to authorize their declaration to be given in evidence, until made such by the Act of 1849. They were appointed by the directors as a committee, but that vote had no effect to vest in them the property of the bank, as was done by the Act.