Lieberman v. First National Bank of Wilmington
| Decision Date | 19 January 1900 |
| Citation | 8 Del.Ch. 519,45 A. 901 |
| Court | Court of Chancery of Delaware |
| Parties | NATHAN LIEBERMAN, Complainant below Appellant, v. THE FIRST NATIONAL BANK OF WILMINGTON, Respondent |
APPEAL FROM THE COURT OF CHANCERY [*]. --The facts in this case are fully stated in the report of the case in the Court of Chancery. Ante p. 229.
The assignment of errors was as follows:
The complainant complains and says that in the records and proceedings of the above entitled cause there is manifest error in this, to wit:
1. The Chancellor erred in ordering, adjudging and decreeing that the injunction issued in this cause be dissolved.
2. The Chancellor erred in finding that the term of office of Peter T. E. Smith, for his good behavior, in which the sureties in the bond, dated June 1st, A. D. 1879, became bound, continued until the giving of the official bond, dated July 6th, A. D 1885.
3. The Chancellor erred in finding that while the bond dated June 1st, A. D. 1879, was in force, the said Peter T. E. Smith abstracted from the said The First National Bank of Wilmington, the sum of eleven thousand, six hundred and fifty dollars.
4. The Chancellor erred in finding that the term of office of Peter T. E. Smith, for his good behavior, in which the sureties in the bond, dated July 6th, A. D. 1885, became bound, continued until the discovery of the defalcations by the said Peter T E. Smith by said bank on or about the 18th day of February A. D. 1893.
5. The Chancellor erred in considering that the complainant as one of the sureties for the said Peter T. E. Smith, in his official bond, dated June 1st, A. D. 1879, ought in equity and good conscience to reimburse and pay to the said The First National Bank of Wilmington the several sums of money abstracted by the said Peter T. E. Smith, between the first day of June, A. D. 1879, and the 6th day of July, A. D. 1885 aggregating the sum of eleven thousand, six hundred and fifty dollars ($ 11,650), with interest on the said several sums of money so abstracted from the several dates whereon the same were abstracted respectively, and with interest on the sum of five hundred and twenty dollars ($ 520), part of said sum of eleven thousand six hundred and fifty dollars from the 6th day of July, A. D. 1885.
6. The Chancellor erred in considering that the complainant as one of the sureties for the said Peter T. E. Smith, in his official bond, dated July 6th, A. D. 1885, ought in equity and good conscience to reimburse and pay to The First National Bank of Wilmington the several sums of money abstracted by the said Peter T. E. Smith between the 6th day of July, A. D. 1885, and the 18th day of February, A. D. 1893, aggregating the sum of twenty-seven thousand seven hundred and fifty dollars, with interest on the said several sums of money so abstracted from the several dates whereon the same were abstracted respectively.
7. The Chancellor erred in ordering, adjudging and decreeing that the said defendant, The First National Bank of Wilmington have liberty to collect its judgment in the Superior Court of the State of Delaware, in and for New Castle County, against the complainant for fifteen thousand dollars, with interest thereon from the date of the recovery thereof and costs thereon, (No. 299 of February Term, A. D. 1893) being a judgment on said official bond, dated June 1st, A. D. 1879, and also have liberty to collect its other judgment in said Superior Court against the complainant for fifteen thousand dollars, with interest thereon from the recovery thereof and costs thereon, (No. 301 of February Term, A. D. 1893) being a judgment recovered on said official bond, dated July 6th, A. D. 1885.
8. The Chancellor erred in ordering that the complainant pay the costs in this case within three months from the date of said decree or attachment.
9. The Chancellor erred in not decreeing that said complainant is not liable to pay the said judgments or either of them or any part thereof and that the complainant is entitled to be relieved from the payment thereof and to have said judgments discharged and annulled.
The case was heard on appeal Jaunary 19, 1900, before LORE, C. J., and GRUBB, PENNEWILL and BOYCE, J. J.
The case was argued by B. Nields, for the complainant below, appellant and Lewis C. Vandegrift and Herbert H. Ward, for the respondent, the Honorable Edward G. Bradford, who was also counsel for the respondent in the Court of Chancery, having, since the decision been appointed United States District Judge, for the District of Delaware.
The argument in the Supreme Court covered the same ground, precisely, as that before the Chancellor, and the briefs filed in the two Courts were almost identical.
The additional points on each side are here noted.
Decree entered and ordered that the appellant pay the costs in this case within three months, or attachment.
B. Nields, for complainant, called attention to the fact that the case of Graves vs. Lebanon National Bank, 10 Bush 23, upon which he had very much relied in the argument before the Chancellor, had since that time been approved and affirmed by the Court of Appeals of Kentucky; in the case of Deposit Bank of Midway's Assignee vs. Hearn, (decided by the Court of Appeals of Kentucky, December 1, 1898,) 104 Ky. 819, 823, 48 S.W. 160. The same case was also referred to with approval in another case in the Kentucky Court of Appeals. Belleview Loan and Building Association vs. Jeckel, 104 Ky. 159, 164.
He also cited a decision of the Supreme Court of the United States, American Surety Co. vs. Pauly, 170 U.S. 133, 151, in which Mr. Justice Harlan delivered the opinion, and in doing so, reviewed the case of Graves vs. Lebanon National Bank, among others, and observed that the cases relating to sureties in bonds given to corporations, arose directly between the sureties and the corporations represented by their boards of directors or by some of the officers acting within the authority conferred upon them; and that those relating to the liability of a principal by reason of the acts or representations of his agent arose out of the agent's acts or declarations, in the course of the business entrusted to him.
Mr. Nields also criticised the case of Ashuelot Savings Bank vs. Albee, 63 N.H. 152, on which the Chancellor commented at length in his opinion, and submitted, that there is a wide difference between the case of the savings bank and a national bank, and that an equity rule that applied to the surety in one case, would have no application to the surety in the other. This New Hampshire case does not appear to be cited or referred to in subsequently important reported cases where like questions are raised. It was not cited, nor does it appear to have been referred to in the late well considered case of American Surety Co. vs. Pauly, and I, therefore, infer that it is not regarded as an authority except in that State.
Holden vs. New York and Erie Bank, 72 N.Y. 286, 292, was also cited as a case in which the action was grounded on fraud of the cashier in matters with which he was connected, not only as cashier, but individually and as executor of an estate. The Court held that whatever knowledge, information or notice he had in either of these capacities he carried with him in to the exercise of the other.
L. C. Vandegrift, for the respondent, in addition to the authorities and arguments submitted in the Court of Chancery, contended that the argument on behalf of the complainant relating to fraudulent representations alleged to have been made by the appellee, comprising the alleged conversations between the cashier of the bank and the appellant, and the publication of the reports of the bank were not applicable to this case, because the corporation did not incur any liability by reason of either of these representations.
Those attributed to the cashier were not within the course of the business entrusted to him, nor within the authority conferred upon him. American Surety Co. vs. Pauly, 170 U.S. 133.
So, as to the publications,--the act of Congress requiring the reports to be published is not a provision for aiding the employes of the bank in obtaining sureties on their official bonds; and the requirement of publication does not establish, between the bank and the public, such privity, as to authorize any one to become a surety of an employe on the faith of a statement, in the published reports, that the examinations were thorough. Savings Bank vs. Albee, 63 N.H. 152.
Mr. Vandegrift also commented upon the effort, on behalf of the appellant, to overcome the force of Savings Bank vs. Albee, by the decisions of the Kentucky Court of Appeals. Graves vs. Lebanon National Bank, 10 Bush 23, was before the New Hampshire Court and the two cases must be considered together.
It would of course be natural for the recent Kentucky case of Deposit Bank, et al. vs. Hearne, to follow the prior decision. It is, however, perfectly consistent with the last Kentucky decision that knowledge of the clerk's dishonesty was actually brought home to the corporation prior to the time it took the defendant's bond.
These Kentucky decisions are not consistent with reason or authority, nor with American Surety Co. vs. Pauly, 170 U.S. 133, which the appellant tries to bring to their support.
Reference may also be made to a contention on appellant's behalf that there was error in finding that Smith's term of office continued during the entire twelve years succeeding November 1, 1879, the date of the first bond. If this contention means that Smith was elected for a less time or that the by-laws of the bank named a shorter term than six years, and, therefore, the appellant, as surety, was not bound longer than the actual term Smith was elected to serve under the...
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