Guardian Fire & Life Assurance Co. v. Thompson

Myrick, J. — The defendant Thompson, as local agent

of plaintiff, gave a bond, with his co-defendants as sureties, for the faithful performance of his duties, and for [209]the payment to plaintiff of such sums as he might receive for premiums on insurance. This action is on the bond.

The court below found that for some time previous to the execution of the bond in suit, Thompson acted as agent of plaintiff, and in such capacity defrauded plaintiff of two thousand dollars premiums collected by him, and that the general agent of plaintiff well knew of such defalcation before the execution of the said bond; and that neither said general agent nor any officer or agent of plaintiff informed the sureties of such defalcation, but on the contrary concealed and suppressed the same from said sureties.

1. The principle of law applicable to the facts of this case is thus stated in Brandt on Suretyship and Guaranty, section 367: “If the party who takes a bond for the conduct of the principal in an employment knows at the time that the principal is then a defaulter in said employment, and conceals the fact from the surety, such concealment is a fraud upon the surety, and discharges him.....An agent for the sale of coal on commission, who by agreement was bound to turn over his receipts to his employers within a specified time, was largely in arrear, and was required by his employers to find security, and a surety became bound for him to the extent of one thousand pounds. The agreement of suretyship recited the terms of dealing between the employer and the agent, but the fact of the indebtedness was concealed from the surety. Held, the surety was discharged, on the ground that under the circumstances the recitals in the agreement amounted to an active misrepresentation.”

“ A person taking a bond for the future good conduct of an agent already in his employment must communicate to a surety his knowledge of the past criminal misconduct of such agent in'the course of such past employment, in order to make such bond binding.

“The mere non-communication of such-knowledge, irrespective of motive or design, is a. fraud in law, which [210]