Bank Of Tarboro v. Fid. & Deposit Co. Of Md.

• Decision Date: 28 May 1901
• Court: North Carolina Supreme Court
• Parties: BANK OF TARBORO . v. FIDELITY & DEPOSIT CO. OF MARYLAND.

38 S.E. 908

128 N.C. 366

BANK OF TARBORO .

v.FIDELITY & DEPOSIT CO. OF MARYLAND.

Supreme Court of North Carolina.

May 28, 1901.

PRINCIPAL AND SURETY—ACTIONS AGAINST SURETY — EVIDENCE — WRITTEN MEMORANDUM — ADMISSIBILITY — RELEASE — CONDITIONS—CONSTRUCTION — NOTICE — DUTY OF OBLIGEE—DELAY — SUPERVISION — INSTRUCTIONS.

1. Where, in an action on plaintiff's defaulting cashier's bond against the surety, a witness testified to taking in writing the testimony of the cashier in his examination before a committee of plaintiff's directors, writing down the questions and answers as they were made, all of which were in his handwriting, it was proper to admit the written memorandum in evidence as part of the testimony of such witness.

2. Under Laws 1893, c. 300, § 5, providing that any company executing a surety bond may be released from liability as surety on the same terms as are or may be by law prescribed for the release of individuals on any such bonds, a surety company can release its liability by getting off the bond whenever any individual could do so, but it cannot remain on the bond and limit its liability by such unreasonable restrictions as would practically amount to a release by tending to defeat a recovery after loss.

3. Where a bond of a surety company, given for the faithful performance of the duties of a bank cashier, in its form and essence resembles an insurance contract, and differs materially from the ordinary forms, and is capable of two constructions, it will be construed most strongly against a forfeiture of the indemnity for which it was given.

4. In an action by a bank against the surety on its cashier's bond, it was proper to instruct that, if plaintiff in a reasonable time, and with due diligence, under the circumstances, and in view of all the facts in evidence, gave notice of the cashier's default, plaintiff had complied with requirement of the bond to give immediate notice of default, plaintiff not being required to give notice on suspicion that the cashier was guilty of fraudulent conduct, but only when it had actual knowledge of facts which would justify a charge of default, and it was entitled to a reasonable time to investigate the cashier's accounts before it was required to give notice if such investigation was necessary to ascertain the facts justifying a charge of fraud.

5. Where a surety on a cashier's bond was not notified immediately of the default of the cashier, as required by the bond, but the hank investigated to obtain actual knowledge of default before giving the notice, such delay did not injure the surety because the bank obtained all the security the cashier could give, which the surety might have obtained by earlier notice, since by signing the bond it acquired no right of reimbursement superior to that of the bank.

6. In an action by a bank against the surety on its defaulting cashier's bond, it was proper to instruct that the supervision and duty required of the bank officers over the management of the affairs of the bank was such care, supervision, and duty as the ordinary prudent business man would give.

Appeal from superior court, Edgecombe county; Coble, Judge.

Action by the Bank of Tarboro against the Fidelity & Deposit Company of Maryland on a surety bond. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

John L. Bridgers, for appellant.

H. G. Connor & Son and G. M. T. Fountain, for appellee.

DOUGLAS, J. This case has been here before, and is reported in 126 N. C. 320, 35 S. E. 588. As far as that decision goes, it will be considered as final in the determination of this case. The following are the issues as submitted and answered: "(1) Did Mehegan, as cashier, and while in the performance of the duties of his office, between December 15, 1895, and September 3, 1897, fraudulently take from the assets and money of plaintiff bank the sum of $5,000, and on May 27, 1897, for the purpose of concealing his fraudulent conduct, charge said amount to the City National Bank of Norfolk on the books of plaintiff bank? Ans. Yes. (2) Did the defendant, Mehegan, between December 15, 1896, and September 3, 1897, as cashier, fraudulently take from the assets of the plaintiff bank a sum of money by means of overdraft on said bank aggregating $1,000 and more? Ans. Yes. (3) Did the defendant Mehegan, between December 15, 1895, and September 3, 1897, as cashier, fraudulently take from the assets and money of said bank the sum of $9,550, or other amount, and by false entries on the books of said bank conceal the same from the plaintiff bank? Ans. Yes. (4) Did the defendant, Mehegan, as cashier, between May 12, 1897, and August 6, 1897, fraudulently take from the money and assets of safd bank the sum of $5,000, which he concealed by making false entries in the books of said bank? Ans. Yes. (5) Did the defendant, Mehegan, between December 15, 1895, and September 3, 1897, as cashier, fraudulently take money and assets of thebank, and convert the same to his own use? Ans. Yes. (6) Did the defendant, from September, 1896, to September 1, 1897, as cashier, fraudulently take from the money and assets of the said bank the sum of $452.21, which he applied to his own use? Ans. Yes, (7) Did the defendant, Mehegan, as cashier, on the 3d of August, 1897, fraudulently issue a cashier's check on the said bank to J. M. Norfleet to the amount of $600, for the purpose of paying an individual indebtedness of said Mehegan? Ans. Yes. (8) Did the defendant, Mehegan, fraudulently discount notes and bills, and pay for the same with money of the bank, without the knowledge and assent of the proper committees? Ans. Yes. (9) Did the plaintiff notify the defendant Fidelity & Deposit Company of the alleged default of the said J. G. Mehegan as required by the bond? Ans. Yes. (10) Did the plaintiff, after the execution of the surety contract, increase its capital stock? Ans. Yes. [This was answered by the jury "Yes, " in April, 1890.] (11) Were the representations in the certificate for the renewal of the surety bond as to the dealings and accounts of the said Mehegan, cashier, true and correct when they were made? Ans. Yes. (12) Were such representations as to the dealings and accounts of the said Mehegan, cashier, on the said certificate, false to the knowledge of the plaintiff at the time they were made? Ans. No. (13) Did said representations constitute a material inducement of the defendant company to continue said bond from December 15, 1896, to December 15, 1897? Ans. No. (14) Did the plaintiff cause to be observed due and customary supervision over said Mehegan, cashier, for prevention of default? Ans. Yes. (15) Did the Fidelity & Deposit Company have notice of the Increase of the capital stock before the extension of the bond? Ans. Yes."

The defendant assigns for error: "(1) That the court erred in admitting the written statement as excepted to. (2) For error in instructing the jury as set out in the charge to the jury. (3) In that the instructions are inconsistent, contradictory, and misleading. (4) In the construction of the meaning of the words 'immediately notified.' (5) In instructing the jury that the same supervision and duty required of the officers of the plaintiff bank over the management of the affairs of the bank was such care, supervision, and duty as the ordinary prudent business man would give. (6) For refusing to instruct the jury as requested in the several prayers submitted by the defendant."

The first assignment of error cannot be sustained. The admitted paper was a memorandum of the examination of the defendant, Mehegan, before a committee of the board of directors of the plaintiff bank, and taken down by the witness Davis, who testified as follows: "Mehegan was present before the committee. He was examined. His examination was put in writing, —was recorded at the time in writing. I read every sentence to Mehegan as Mr. Fountain propounded the questions. Then I wrote down Mehegan's answer. I read the questions and answers as they were made, and he said that they were correct. The entire paper is in my handwriting. Then read the whole over to Mehegan. He never refused to sign; never was asked to sign it." Under such circumstances we think the paper was admissible as part of the testimony of Davis, with whose credibility, of course, its own was involved. Bryan v. Moring, 94 N. C. 687; State v. Pierce, 91 N. C. 606; State v. Jordan, 110 N. C. 491, 495, 14 S. E. 752.

We do not think that either the second or third assignments can be sustained. The judge's charge extends through 15 pages of the printed record, and is full, clear, and explicit, and, we think, free from substantial error. Many of the points raised by the defendant come under the principles decided when the case was first before us. We then said (126 N. C. 324, 35 S. E. 589): "The object of the contract was to secure the plaintiff against the fraudulent acts of its cashier. ...