ter, and said to him that the money was used in the mayor's race. This latter statement the vice president denied having made. We quote from the bill of exceptions the following statement: ident, however apparently reasonable those explanations may have been, and however honest may have been the belief in their truth. This being so, it follows that the only basis upon which it could have been found that the bank was dissatisfied was the deduction from the facts and circumstances that the bank knew of the fraud which the transactions were intended to effectuate. And this latter view was stated by the court to the jury. Referring to the alleged fraudulent checks and drafts of the president, the court said: "The mere fact of drawing for more than you have got in the bank without any fraudulent intent in that mere transaction would hardly be a fraudulent act within the meaning of this bond. "There was also evidence tending to show that J. M. McKnight was president of the bank, and the other officers of the bank, including the directory, had entire confidence in his honesty and integrity up to the time the bank was closed; that none of them had any knowledge that any act of his, in the management of said bank, was fraudulent or dishonest, until after the closing of the bank; that said bank had a discount committee who regularly examined and passed on the papers of the bank, as required of such committee, and the directory of said bank undertook to make a monthly investi- "Now, I suppose in this case, if the bank gation-sometimes twice a month-of the had known that McKnight was making these affairs of said bank, and required the presi-drafts for these various fraudulent purdent to go through same with them and poses, such as buying up councilmen, buymake a full report thereon; that some ofing up aldermen, paying his own personal the directors were in the bank almost daily debts; if the bank had known that and coninspecting its affairs, and that they did at sented to it, there would not have been a all times observe due and customary super-fraudulent act by McKnight for which the vision over said president for the prevention bank could recover against this company. of default; that none of the officers of said bank, including the directory, had any knowledge of the various checks set up in the petition as fraudulent, and that were charged to the account of other parties than those drawing them, or on whom they were drawn, except the clerks who charged them up to said account as stated, and there was evidence tending to show that they charged them up to such accounts by the direction of McKnight, the president, and except, further, R. E. Reutlinger, the cashier and teller of said bank, knew of said checks when they came into said bank and was instructed to hold them as cash items by McKnight, but further than this he had no knowledge [of them]." "But if you believe from the evidence that the bank did not know of the fraudulent purposes for which the overdrafts were made, if the overdrafts were made in connection with this matter,-if you believe the bank did not know the fraudulent *purposes. [358] then that changes the result; because if the bank did not know and still consented to it, it would not relieve the act of McKnight from the character of being a fraudulent act. So that, as I view the case-you must remember, however, that you are the sole judges of the evidence in this case and its credibility-as I view this case, however, there would be no fraudulent acts upon MeKnight's part (limiting my observations now to the overdrafts), there would be no fraudulent acts upon his part merely in an overdraft, if there were no fraudulent intent behind it which was concealed from the bank." Again, the court-referring to the $2,000 note transaction-said: "If you believe from the evidence that the bank did know of this fraudulent purpose, and that this default of McKnight's, this fraudulent act of MeKnight's, in getting these $2,000, was known to the bank at the time, then I instruct you that all of the liability of the defendant in this case would cease then, that being the earliest, or one of the earliest, if not the earliest, of all these transactions. If you believe from the evidence that this transaction was known and condoned by the bank at the time, before these other transactions occurred, then the defendant in this case is not liable." Now, with this state of the record in mind, we come to consider the statements in the certificate signed by the cashier, on May 29, 1896, in answer to the letter of the surety company, shortly before the bond was renewed, to determine whether prejudicial error arose from rejecting the certificate. The certificate stated that the president "has [357] performed his duties in an acceptable and satisfactory manner, and we know of no reason why the guarantee bond should not be continued." There was certainly proof showing that the action of the president as to the three checks, and the charging them to accounts on the books of the bank, deceived the officers of the bank and caused them to be satisfied with the transactions. Certainly, also, there was uncontradicted evidence establishing that the explanation given by McKnight of the discount of the $2,000 note satisfied the directors. There In other words, reiterating in a somewhat was no justification in the evidence on these different form the proposition previously subjects to take the case from the jury and stated, if the certificate transmitted by the instruct a verdict for the defendant upon the cashier to the surety company had been retheory that in and of themselves the trans-ceived in evidence it would not alone have actions were of such a character as to pre- availed as a defense, because further proof clude the possibility of a belief in the suffi- would have been required showing the falsciency of the explanation made by the pres-ity of the statements contained in the cer tificate. In view, however, of the uncontra- | cashier of a bank, speaking generally, is the dicted testimony tending to show that in knowledge of the bank as to any matter the course of the transactions relied upon that does not come within the customary or the president had, either by conduct or ex-ordinary duties of a cashier or those which planation, produced the impression on the have been specially imposed upon him by bank that the transactions were bona fide, the action of the bank. I do not think Mr. and therefore relieved the bank from any R. E. Reutlinger, in this case, in respect to dissatisfaction as to the transactions, it any matter which he knew or could do, repmust follow that the falsity of the certifi- resented the bank, if it was outside of his cate could alone have been inferred by con- ordinary duties; and I do not recall anycluding either that the transactions in and thing that he knew, so far as the proof of themselves were of such a character that, shows, that would in anywise affect the liaas a matter of law, no explanations made of bility of the defendant in this case." them by the president could have justified the bank in being satisfied on the subject, 359] or that the surrounding *circumstances were such as to authorize the jury to infer that the bank must have known of the fraud, and therefore to find that the bank could not possibly have been satisfied with the conduct of the president. But the first hypothesis we have pointed out was inadmissible. The second was left to the jury to determine, since the charge of the court was that if the jury could deduce from the proof knowledge on the part of the bank of the fraud of the president, the surety company would not be liable on the bond. As, therefore, the very question which the jury would have been called upon to determine if the certificate had been received in evidence was fully submitted to them and was necessarily negatived by their verdict, no foundation exists for holding that prejudicial error resulted from excluding the certificate. 5. The trial court erred in not instructing the jury that the knowledge possessed by an officer or director of the bank, of the fraudulent purposes of McKnight, though such knowledge had not been communicated to the bank, should be treated as the knowledge of the bank; and also erred in not in structing the jury that the knowledge which any officer or director of the bank might have acquired of the fraudulent conduct of McKnight, if such officer or director had exercised customary supervision, should be imputed to the bank. Objection was made to the foregoing portion of the charge, on the ground that the knowledge of the cashier of the acts of MeKnight in respect to his overdrafts, his transactions in connection with the $2,000 note signed by the two aldermen and with the checks to Edmunds, and the several checks for McKnight's individual account, was the knowledge of the bank, and that the jury should have been so told. Instruction No. 7 dealt with the $2,000 note transaction. In effect, the jury were instructed that the knowledge of the cashier acquired in the performance of his duties might be imputed to the bank, but that the vice president or an individual director did not hold such an official relation to the bank as that his knowledge of wrongdoing by McKnight, if not communicated to the bank, could be treated as the knowledge of the bank. We do not deem it necessary to analyze the instructions given by the court for the purpose of determining whether they were in all respects accurate, because we are of the opinion that if the court in anywise erred it was in giving instructions which were more favorable to the defendant surety than was justified by the principles of law applicable to the case. It is well settled that, in the absence of express agreement, the surety on a bond given to a corporation, conditioned for the faithful performance by an employee of his duties, is not relieved from liability for a loss within the condition of the bond by reason of the laches or neglect of the board of directors, *not amounting to fraud or bad faith,[361] and that the acts of ordinary agents or employees of the indemnified corporation, conniving at or co-operating with the wrongful act of the bonded employee, will not be im The questions which these propositions embrace were raised by the exceptions taken to certain portions of the charge to the jury, referred to in the record as instructions Nos. 5, 6, and 7. In instruction No. 5 the court told the jury, in general terms, that the bank, under the stipulations contained in the bond, owed to the surety the duty of ex-puted to the corporation. United States v. ercising due and customary supervision over McKnight to prevent the commission by him of fraudulent acts, and further instructed that if the bank knew of the fraudulent purposes of McKnight in connection with the drafts and checks upon which recovery was sought, the surety would not be liable. Ex ception was taken to this instruction, on the ground that it "did not submit correctly to the jury consideration of knowledge on the part of the officers or directors of the bank other than McKnight, which they had, or would have had, if customary supervision [360]*had been exercised.” Instruction No. 6, and the objection made to it, reads as follows: "I do not think that the knowledge of a Kirkpatrick (1824) 9 Wheat. 720, 736, 6 L. "Corporations can act only by officers and payments are for their own security, and as to which the court was instructing the not for the benefit of the sureties. The sure-jury in the portions of the charge under conties, by executing the bond, became responsideration, is as follows: sible for the fidelity of their principal. It ""That the employer shall observe, or is no collateral engagement into which they cause to be observed, due and customary suenter, dependent on some contingency or pervision over the employee for the prevencondition different from the engagement of tion of default, and if the employer shall their principal. They become joint obligors at any time during the currency of this with him in the same bond, and with the bond condone any act or default upon the same condition underwritten. The fact part of the employee which would give the that there were other unfaithful officers and employer the right to claim hereunder, and agents of the corporation, who knew and shall continue the employee in his service connived at his infidelity, ought not in reawithout written notice to the company, the son, and does not in law or equity, relieve company shall not be responsible hereunder for any default of the employee which may them from their responsibility for him. occur subsequent to such act or default so They undertake that he shall be honest, condoned.' though all around him are rogues. Were *Manifestly, this stipulation is not fairly [363 the rule different, by a conspiracy between subject to the construction that it was the the officers of a bank or other moneyed insti-intention that the neglect or omission of a tution, all their sureties might be dis- minority in number of the board of directcharged. It is impossible that a doctrine ors or the neglect or omission of subordinate leading to such consequences can be sound.officers or agents of the bank should be In a suit by a bank against a surety on the cashier's bond, a plea that the cashier's defalcation was known to and connived at by the officers of the bank, was held to be no defense. Taylor v. Bank of Kentucky, 2 J. J. Marsh. 564." So, also, in 3 La. Ann. 674, the court, after suggesting the distinction between the knowledge of the governing body of a bank, the board of directors, of the default of a [362] bonded employee, and the knowledge of such default by another officer or employee, not communicated to the board, thus tersely stated the applicable doctrine (p. 684): * "It cannot be said that if one servant of a bank neglects bis duty, and by his carelessness permits another servant of the bank to commit a fraud, the surety of the fraudulent servant shall be thereby discharged." And see American Surety Co. v. Pauly, 170 U. S. 156, 157, 42 L. ed. 986, 18 Sup. Ct. Rep. 552, and cases cited. In other words, the principle of law discussed in the case of The Distilled Spirits, 11 Wall. 356, sub nom. Harrington v. United States, 20 L. ed. 167, viz., that the knowledge of an agent is in law the knowledge of his principal, is intended for the protection of the other party (actually or constructively) to a transaction for and on account of the principal had with such agent. In the very nature of things, such a principle does not obtain in favor of a surety who has bonded one officer of a corporation, so as to relieve him from the obligations of his bord, by imputing to the corporation knowledge acquired by another employee subsequent to the execution of the bond (and from negligence or wrongful motives, not disclosed to the corporation), of a wrong committed by the official whose faithful performance of duty was guaranteed by the bond. As the rule of imputation to the principal of the knowledge of an agent does not apply to such a case, it must follow that it can only obtain as a consequence of an express provision of the contract of suretyship. Was there such a provision in the bond now under consideration? Now the clause of the bond sued on, and دو treated as the neglect or omission of the Now, applying the principles previously expounded to the case in hand, it is evident that the court rightly refused to instruct the jury that the mere knowledge of one or more | Argued April 25, 1902. [364]directors, *less than a majority of the board, and of the vice president of the bank, of the cashier in the course of the business of the A 1902. Decided June 2, PPEAL from the Court of Appeals of the District of Columbia to review a decree which affirmed a decree of the Supreme Court of the District ordering a conveyance, on compliance with certain conditions, to the complainant in a suit to set aside a conveyance of realty. Reversed. See same case below, 17 App. D. C. 104. Statement by Mr. Justice White: 6. The court of appeals erred in affirming appellee herein, filed a bill in the supreme On September 1, 1896, Lily Alys Godfrey, the action of the trial court in instructing court of the District of Columbia, sitting in the jury that the carelessness of the di-equity, to establish her title to five lots of rectors in the management of the bank was not an issue for them to consider. land situated in the city of Washington, of which it was asserted she had been defraud ed by one Stephen A. Dutton. The defendants to the bill were Dutton In considering the clause of the charge to the jury which provided that "due and customary supervision over the employee" should be observed "for the prevention of de- and wife, Louis W. Richardson, Fred M. fault," the trial court told the jury that it Czaki, and Mary Alice Godfrey (mother of imported "a reasonable vigilance upon the complainant). Omitting averments relatpart of the bank to prevent defaults," that ing to real estate other than that now in conis, to prevent the commission of fraudulent troversy, it suffices to say that the bill deacts by McKnight. To instruct the jury in tailed grossly fraudulent and criminal pracbroad terms that if they found that the di-tices, by which Dutton, without considerarectors were careless in the management of the bank generally they should find for the defendant, could only have served to mislead. The court did not err in refusing the requested instruction. Judgment affirmed. Mr. Justice Gray and Mr. Justice Brewer did not hear the argument, and took no part in the decision of this cause. tion, on or about March 26, 1896, obtained tion to the defendant Richardson. The lat- [365]*BRAINARD H. WARNER and Louis D. constructive, of any equity of the complain Wine, Appts., 1. 2. A case cannot be remanded by an appellate court for the purpose of allowing the complainant to amend a bill in order to assert a new and distinct ground of relief. if the defendants are deprived by such mandate of all opportunity to interpose any defense. Parties who, with knowledge of all the facts, sue to set aside a conveyance for actual fraud, cannot be permitted by the mandate of an appellate court, after a determination by it against them of every issue actually litigated, to amend their bill by asserting constructive fraud as a new and distinct ground for relief, with a prayer for a reconveyance upon payment to defendants of such sums as have been expended by them for and on account of the property, especially where such complainants have persistently declined to accept from the defendants an offer to reconvey upon these very terms. [No. 191.] ant: that, through his brokers or agents, B. H. Warner & Co., he had paid full consideration to Dutton for the property, and he anInexed to the answer, as a part thereof, the contract of purchase from Dutton, a copy of which is in the margin.t *On March 28, 1897, a decree pro confesso[367] was entered as to one of the lots of land affected by the bill, which is not involved in this controversy, and title to which remained in Dutton. By the decree the legal title to said lot was established in the complainant. By an amended bill filed on May 1, 1897, Warner and Wine were made defendants to The amendment added to the the cause. clause in the original bill, which charged "Brainard H. Warner. Clarence B. Rheem. Geo. W. F. Swartzell. Louis D. Wine. "Office of B. H. Warner & Co., 916 F. St. N. W., Washington, D. C. "Articles of agreement, made and entered into this 10th day of April, A. D., one thousand eight hundred and ninety-six, by and between -, party of the first part, and Louis W. Richardson, party of the second part, in manner and form following: The said party of the first part in consideration of the sum of five hundred (500) dollars to his agents, B. II. Warner & Co., duly paid as a deposit, the re that the conveyance to Richardson was with- ty thousand dollars could readily be negotiated on the security of said property, and "That the said Richardson was only a stated that if he would return the following nominal party to the said transaction; the week she would have everything in readireal parties were the said Dutton, on the one ness to complete the transaction. Accordpart, and Brainard H. Warner and Louis D. |ingly the said Dutton came again to the said Wine, on the other; that the said Wine and city of Washington on or about the 10th day Warner pretend that they advanced or fur- of April, then next, and, going to the office nished to the said Dutton the sum of six of said B. H. Warner & Co., then and there thousand five hundred and eighty-six and signed a paper-writing or contract agreeing ($6,586.33) dollars, and took from the to sell all of said lots in square 134 at and said Dutton the said conveyance to the said for the grossly inadequate price of $25,000, Richardson to secure the repayment of the said sum being less than one half the price said sum so claimed to have been advanced. or consideration at which the said B. H. Whether said Warner and Wine actually Warner & Co. had been authorized to sell the furnished said Dutton such sum or any sum said lots by said Mary Alice Godfrey." whatsoever the complainant cannot affirm After averring that, by reason of the ciror deny, and demands strict proof in that be- cumstances referred to, the defendants were half, and she avers that the said Warner put upon notice as to whether Dutton had and Wine had such notice of the frauds of honestly acquired the property, it was the said Dutton as herein set forth, and of charged that it was the duty of defendants such facts and circumstances as put them to have notified the complainant of the propon inquiry as to the conveyance to said Dut-osition of Dutton, but that no notice, in fact, ton, that in equity they should have no bene- was given. It was averred, moreover, that fit from said conveyance to said Richardson, the said firm and the defendants Warner but the same should be decreed to be can- and Wine "purposely and intentionally conceled and held for naught." cealed the fact that the said Dutton had signed the aforesaid contract to sell said lots at and for the grossly inadequate sum of $25,000, and that he was eager and anxious to dispose immediately of said lots so soon after acquiring the same." And further, it was averred that "the said defendants, Warner and Wine, immediately set about the acquisition of said lots for their own benefit, and, with a view to, and for the On July 17, 1897, before any pleading by Warner and Wine, an amended and supplemental bill was filed, accompanied with numerous interrogatories required to be answered by the defendants Warner and Wine. The averments of the original bill as to the fraudulent practices by which Dutton had obtained the property of complainant were reiterated. As respects the defendants Warner and Wine, it was charged that Dut-purpose of, concealing their connection with ton, on March 29, 1896, with the object of said transaction, caused the title to the said consummating the fraud which he had prac- lots to be conveyed to defendant Richardson tised upon the complainant, "entered into by a pretended deed, bearing date the 13th negotiations with said B. H. Warner & Co., day of April, 1896," and that said Richardor said defendants, Warner and Wine, son, because of his youth and inexperience through one Ellen S. Mussey, a lawyer of and his relationship to the defendant Wine, said city, to whom he applied for a loan on and his connection in business with the firm [368]the security of this *complainant's said prop- of B. H. Warner & Co., "was chosen as the erty, and on information and belief this instrument or tool of the said defendants complainant charges that said Ellen S. Mus- Warner and Wine, *for the consummation of[369] sey, after bringing the matter to the atten- their schemes to get possession of this comtion of the said B. H. Warner & Co., or said plainant's said property for the said grossWarner and Wine, reported to the said Dut-Îy inadequate sum of $25,000." ton that a loan of from twenty-five to thirceipt whereof is hereby acknowledged, hereby agrees to sell unto the party of the second part, the following-described real estate in the city of Washington and District of Columbia: Lots 66, 1, 2, and 3, square 134, Washington, D. C. "For the sum of twenty-five thousand (25,000) dollars, which the said party of the second part agrees to pay to the said party of the first part as follows: which "Seventy-five hundred (7,500) cash, balance A joint and several answer was filed on to the trust referred to above, which deed shall contain the usual full covenants. The terms of sale to be complied with in five days from the date hereof, and said deposit to be applied in part payment of the purchase of the said described real estate. Title to be good and marketable or deposit returned. "And it is understood that the stipulations aforesaid shall apply to and bind the heirs, executors, administrators, and assigns of the respective parties. "In witness whereof the parties to these presents have hereunto set their hands and seals the above day and date. |