8 Mo. App. 37 | Mo. Ct. App. | 1879
delivered the opinion of the court.
The case was referred, and the referee reported the material facts, in substance as follows: The plaintiff was a stockholder in the defendant company, and from 1872 until 1876, a director. One Bull had for several years before 1873 been secretary of the company, and as such he received the moneys of the company, which were also disbursed through him upon order of the proper officer. In the fall or early winter of 1873, Bull became a defaulter in his accounts with the company. Mr. Pritchard was at this time president of the company, and continued such until May, 1876. On the defalcation becoming known to Pritchard, he and the vice-president, for the company, accepted in satisfaction a note which was secured by a deed of trust given by the mother of Bull upon her real estate, which note was finally paid in 1877. Bull continued to act as secretary of the company until June, 1877, his conversion of the company’s funds having been disclosed to no one ox its officers except the president and vice-president.
The present suit is for the recovery of two dividends declared on capital stock; and in its answer the defendant set up that Bull was employed by the defendant as its secretary on May 6, 1876, and that in August, 1876, the plaintiff became a surety on the bond of Bull, conditioned for the
The defendant claims there was error in the referee’s legal conclusion, which was confirmed by the court below, that the defendant’s failure to give plaintiff notice of the first conversion of the funds of the company rendered the bond void as against the plaintiff, and discharged the latter. It is denied that the mere non-disclosure of past misconduct known to the obligee, but unknown to, and not inquired into by the surety, is fraudulent in any sense.
The rule in regard to the obligation of disclosure on the part of the creditor, or obligee, of facts affecting the risk of the surety, but unknown to'him, is sometimes laid down, even in judicial opinions, in very unqualified terms. It is often taken for granted that no distinction exists between the non-disclosure óf material facts by a creditor and by an insurer. See 1 Story’s Eq. Jur., sects. 215, 216. But, as was observed in an English case decided by judges of high authority, the contract of insurance is peculiar, and rests largely on mercantile usage. North British Ins. Co. v. Lloyd, 10 Exch. 531. Still, the two contracts seem to have this in common : that intent to deceive by suppression of a material fact is not essential to the avoidance of the contract. . But they are distinguished in this: that no element of trust or confidence reposed, necessarily or from the course of business, arises between creditor and surety,— the two, as often happens, dealing at arm’s length. If the facts of the decided cases were considered, it will be found that they fall far short of sustaining the doctrine as it is often expressed. Though passages not infrequently occur
If the circumstances are such that it can be fairly inferred that the surety reposed confidence in the obligee, and the latter suffered the former to deal under a material delusion ; or if obligee and surety were brought into such connection with each other as to make the concealment equivalent to an assertion, on the part of the obligee, of the non-existence of the facts concealed, the contract of suretyship would be avoided. But, as said in Franklin Bank v. Stevens, supra, the facts concealed must be those immediately affecting the liability of the surety, and bearing directly on the particular transaction to which the suretyship attaches. The failure to disclose need not be wilful or intentional on the part of the obligee, or with a view to his advantage (Railton v. Matthews, 10 Cl. & Fin. 934; Sooy v. The State, 39 N. J. L. 135), but his act must be such as to have operated as a fraud on the surety. Hence the plea of fraud, since the facts are fraud in law.
The application of these principles will determine the present case. The motive of t.he company was unimpor
The conclusion of the referee that the defendant’s failure to give the plaintiff notice of the fraudulent conversion rendered the bond void, was correct, and the judgment in accordance therewith will be affirmed.