United States Life Insurance v. Salmon , 98 N.Y. Sup. Ct. 535 ( 1895 )

FOLLETT, J.

The plaintiff excepts to the ninth finding of fact, to so much of the tenth as is printed in italics, and to the three conclusions of law. No other exceptions were filed. It must be conceded that, if the findings of fact excepted to are sustained by the evidence, the judgment must stand, unless there were erroneous rulings on the admission or exclusion of evidence. It is well settled that in case an obligee takes a bond as security for the fidelity of his agent, who, to the knowledge of the obligee, has previously violated the trust reposed in him, and the obligee does not disclose the misconduct to the sureties, he is guilty of a fraudulent concealment of a material fact, which good faith requires the disclosure of, and he cannot recover of the sureties. Machine Co. v. Farrington, 82 N. Y. 121; Bostwick v. Van Voorhis, 91 N. Y. 353; Telegraph Co. v. Barnes, 64 N. Y. 385; Ludekens v. Pscherhofer, 76 Hun, 548, 28 N. Y. Supp. 230; Bank v. Van Slyke, 49 Hun, 7, 1 N. Y. Supp. 508.

The plaintiff’s president and secretary testified that in June, 1893, the Mannings were short in their account $5,000, for moneys collected and not paid over. This defalcation was settled July 8,1893, by the promissory note of the sureties on a previous bond. This note fell due October 11, 1893, and was protested for nonpayment. In the latter part of October, 1893, the secretary investigated the affairs of the agency, and found the Mannings short $8,806.55. On the 4th of November the secretary took possession of the office of the Mannings, and of all the policies, renewal receipts, and papers, and refused to allow them to act as agents until the deficiency was secured to be paid and the bond in suit furnished. The deficit was secured by mortgages on the property of the sureties for $8,500, and the balance was paid in cash. This being done, and the bond in suit having been delivered November 14, 1893, the affairs of the agency were turned over to the Mannings., The plaintiff’s secretary knew that the Mannings were endeavoring to induce Salmon and Shantz to become sureties on a new bond which was drafted by him, but he did not disclose to them the previous defalcations of the Mannings. This was not good faith. The defalcations of June and of October, 1893, were not different in character from those occurring after November 14, 1893, and disclosed by the account of April 15, 1894. The evidence shows that, when the sureties executed the bond, they had no knowledge of the previous defalcations and misconduct of the Mannings, nor had they any information which should have caused them to inquire in, respect to their conduct.

The ninth and tenth findings are amply supported by the evidence. The plaintiff’s president was asked by his counsel if, before he went to Rochester in April, 1894, he believed the Mannings were honest. This question was objected to by the respondents’ counsel, and was excluded. The president had full knowledge in June, 1.893, and in November, 1893, of the manner in which the Mannings had conducted their business. He knew they were defaulters in considerable sums, and it was not competent for him to characterize their conduct either as honest or dishonest. In the face of these facts, his opinion or belief as to the integrity of the agents was entirely immaterial. The new sureties were entitled to know the facts, and it was for them to judge whether they would become responsible for the fidelity of these agents, who had been found so unfaithful. The respondents were-not allowed to testify to communications made to them by the Mannings in the absence of the plaintiff’s officers, but were simply allowed to prove that the Mannings did not inform them of their previous defalcations and indebtedness to the plaintiff.

The judgment is right, and should be affirmed, with costs. All concur.