
    UNION DIME SAVINGS BANK v. FELTZ.
    
      N. Y. Court of Appeals;
    
      October, 1890.
    1. Contracts ; interpretation.] The contract of a surety is to be construed by the same rule as other contracts.
    
      '■% Principal and surety.] It is not until after the extent of a surety’s obligation has been determined by the language used, in the light of the circumstances surrounding the transaction, that the rule that his liability is strictissimi juris is to be applied. Then the court will protect him against liability not strictly within the precise terms of his contract.
    
    8. Bond for fidelity.] If a fidelity bond is conditioned for performance of the duties of a specified position, and those of any other that may be assigned to and undertaken by him, it covers only defaults while holding that position, though it may be committed in other duties; but if it is conditioned for performance of the duties of clerk or in whatever capacity he may serve, it covers defaults, committed after his promotion to a different position, whether it be deemed to be within the designation of “ clerk ’’ or not.
    4. The same.] A bank book-keeper’s fidelity bond was expressed as-conditioned that the principal, “ who has been appointed clerk of said” bank, should faithfully and honestly discharge “his duties as such clerk or in whatever capacity he may serve said bank and shall faithfully apply and account for all such moneys .... in his hands or under his control as such elerls,” etc. . . . He was afterwards appointed teller, and in that position he defaulted.—Held, that as the condition was not merely for service as clerk and whatever other duties might be assigned to him, but for services as clerk or in whatever capacity he may serve, the bond covered his employment as teller.
    6. Definition of clerk and teller.] The word “clerk” is appropriate to designate the employment of a teller as well as that of a bookkeeper; for he is not an officer of the bank.
    
    Appeal from a judgment.
    The Union Dime Saving Institution sued Florente Feltz, and Otto Bauman on a bond executed on January 23, 1879, by the defendant Bauman, as principal, and the defendant Feltz, as surety. The condition of the obligation was “that if the above bonnden Otto Bauman, who has been appointed clerk of the said Union Dime Savings Bank by its board of directors, shall faithfully and honestly discharge his duties as such clerk, or in whatever capacity he may serve said bank, and shall faithfully apply and account for all such moneys, funds, valuables and property which may come into his hands or under his control as such clerk, and deliver the same on proper demand to the order of the board of directors of said savings bank, or to the person or persons authorized to receive them, without any fraud or other delay, then this obligation to be void.”
    When this obligation was given, Bauman was a bookkeeper in the bank; his duties were solely clerical, had nothing to do with the receipts or disbursements of money, and in that position had not the opportunity, nor could he have taken the money that he afterwards stole, and the nature of the employment was communicated to and understood by the surety before he signed the bond.
    After the execution of the bond he continued to act solely as book-keeper, until the latter part of 1879, when he commenced to act as teller. His duties as teller were to receive money on deposit from customers and enter the same on the passbooks. He also during that period kept some of the books of the bank.
    In July, 1881, he was regularly appointed teller and continued to act as such teller until September, 1886. He disappeared during his vacation, which commenced September 6, 1886, and it was then discovered that he was a defaulter to an amount exceeding $19,000 ; that these defalcations were commenced on July 1, 1885, when he took $500, and on or before June 1, in that year had taken more than $5,000, exceeding the penalty of the two bonds given by him.
    The evidence showed that after his appointment as teller, and down to the time of the defalcation, he kept one of the ledgers of the bank in addition to his regular duties as a teller, and that he made false entries in the ledger kept by him ; also in the ledger kept by the paying teller ; alao in another book kept by another clerk, called the balance and dividend book.
    
      The court at special term—held, that the principal was appointed to a new office; that he ceased to be a clerk or book-keeper on his appointment as teller, and that for his acts as such teller the sureties were not liable. That after his promotion to the position of teller he was not a bookkeeper and not a clerk; and the fact that the bank imposed upon the position of teller additional duties to those usually required of persons occupying that position, would not make him any the less a teller and would not make his act while occupying the position of teller the acts of a mere clerk or book-keeper (citing National Banking Association v. Conk-ling, 90 N. Y. 120; and distinguishing Mayor, etc. of N. V. v. Kelly, 98 Id. 470).
    Judgment was accordingly given for defendant Feltz. Plaintiff appealed.
    
      
      The court at general term reversed the judgment for the reasons stated in .the opinion in another case by the same plaintiff against Neppert on a similar bond, which was decided at the same time.
    In that case the opinions were as follows:
    
      
       Earlier cases abound in statements that the instrument' itself, binding a surety, is to be construed more strictly than one' binding a principal. The anomaly of attempting to apply different rules to the same instrument, where both are bound by it jointly, seems to have led at last, after much fluctuation in the language of the authorities, to-the conclusion indicated in the text.
    
    
      
       See note at the end off next case.
    
    
      
       In Mayor, etc. of N. Y. v. Kelly, 98 N. Y. 470, the court, per Finch, J., say : “ The sureties are never discharged by the imposition of new duties which are distipct and separable from those protected by the guaranty, unless such new employment renders impossible, or materially hinders or impedes, the proper and just performance of the duties guaranteed. Where the new employment is separate and distinct, and in no respect essentially interferes with the duty covered by the bond, the imposition of such added duty is wholly a matter between the employer and servant, with which the sureties have no concern. For misconduct as to the new employment the bondsmen are in no manner responsible, and have no right to complain so long as the added and separable duties do not prevent or tend to prevent the proper and just performance of those which are guaranteed. In such a case, if misconduct occurs, the sole question is whether it was a violation of the duties guaranteed, or of those outside of the bond and its protection. Ordinarily, that proves to be the only inquiry, and, in all cases cited by the respondent, was the substantial point of investigation. Thus in Nat’l Mech. Banking Asso. v. Conkling (90 N. Y. 116), to which our attention is especially called, the book-keeper had been promoted to the office of teller. When we held that the guaranty related wholly to the duties of book-keeper, and such others as might be temporarily added while he remained such, it followed that his promotion to a new office terminated his duties as book-keeper, and so ended his responsibilities in that character, and, of course, the liability of his sureties, while as to his new and separate duties, the sureties had made no contract. If in that case he had remained book-keeper, the liability of the sureties as to that office would have continued, although the duties of •a teller had been added to it (Rochester City Bank v. Elwood, 21 N. Y. 88), unless it further appeared that his failure to keep correct accounts was naturally and necessarily occasioned by the pressure or interference •of his new duties.”
    
   Van Brunt, P. J.

It is assumed by the learned counsel for the respondent that the decision in the case of the National Banking Association v. Conkling (90 N. Y. 116; affi’g 24 Hun, 496), disposes of this appeal.

A very brief examination, however, of the case cited will show that it has no application whatever to the case at bar, except so far as it may declare the general principles which are to govern the construction of contracts It is laid down in the case cited as a rule of construction that a surety is never to be implicated beyond his specific engagement, and his liability is always strictissimi juris and must not be •extended by construction. This contract must be construed by the same rules which are used in the construction of other contracts. The extent of his obligation must be determined by the language used, read in the light of the circumstances surrounding the transaction. But when the intention of the parties has thus been ascertained, then the court will carefully guard the rights of the surety, and protect him against liability not strictly within the precise terms of Ms contract.

The action wás brought as was the one at bar, against a surety who had executed a bond to the plaintiff at the time it .employed the defendant, Conkling, as a book-keeper in its bank. The recitals and condition of the bond were that whereas the above named plaintiff has appointed the above named defendant, Conkling, to the office of book-keeper, and Conkling having accepted the same, and consented to perform the duties thereof, now, the condition of this obligation is such, that if the above named Conkling shall faithfully fulfill and discharge the duties committed to, and the trust reposed in, him as book-keeper, and shall also faithfully fulfill and discharge the duties of any other office, trust or employment relating to the business of said bank, which may be assigned to him, or which he shall undertake to-perform, etc., then the obligation to be void, otherwise to-remain in full force and virtue.” Conkling continued to act as such book-keeper until 1870. In that year he was appointed receiving teller of the bank, at an increased salary, and continued to act as such until he resigned. After his resignation it was discovered that he had embezzled some of the funds of the bank, and the action was brought against the obligors upon the bond to recover the amount thus embezzled, and it was held in that case that the sureties undertook for the fidelity of the principal only while he was-book-keeper, but, if while book-keeper the duties of any other office were assigned to him, their obligation would also extend to the discharge of those duties. But it was held that the parties not having in contemplation at the time of the execution of this bond, the appointment" of the principal to a new office, they were not bound for defalcations committed in the new office to which he had been appointed.

In the case at bar the condition of the bond was as follows : that if the above bounden, Otto Baumann, who has-been appointed clerk of said Union Dime Savings Bank by its board of directors, shall faithfully and honestly discharge his duties as such clerk, or in whatever capacity he may serve said bank, and shall faithfully apply and account for all such moneys, funds, valuables and property which may come into his hands or under his control as such clerk, and deliver the same on proper demand to the order of the board of directors of the said Union Dime Savings Bank, or to the-person or persons authorized to receive them, without any fraud or other delay, then this obligation to be void; otherwise to remain in full force and virtue.

It is to be observed that the position in the bank which the appointee was to occupy is in no way referred to in the condition of this bond. He is simply described as a clerk, or in other words as a servant and employee of the bank, and therefore as long as he remained a clerk or servant or employee of the bank, he comes within the condition of the bond. There was no particular position in the bank, such as that of book-keeper, referred to in the condition of this bond as there was in the case of Conkling.

In his case it is expressly stated that he has been appointed as book-keeper, and the condition of the bond is that he shall faithfully fulfill the duties of such book-keeper and shall, also, faithfully fulfill and discharge the duties of any other office, trust or employment, etc. . In that case the minds of the parties were upon the office of book-keeper and it was during his occupancy of that office that the condition of the bond applied, and when that office was vacated there was no condition to be broken. In the case at bar, however, the condition of the bond is for the fidelity of the principal as clerk, or in whatever capacity he might serve-the bank. Not “ and in whatever capacity he may serve-the bank,” but “ or,” thereby intending that the obligation should cover not only the position as clerk, but any other-position in which he might serve the bank. In the case of Conkling the additional duties were to be added to the original office ; in the case at bar the new duties might be entirely distinct from the original employment, as the condition is in the disjunctive and not in the conjunctive.

Therefore, even if, when the principal was appointed as teller, he was not to be still considered as a clerk in the bank, it would be within the condition of the bond and the intentention of the obligors.

This view is borne out by the effect of the terms used in the remaining part of the condition of the bond. It is said in the evidence that as bookkeeper he had no charge of the moneys, funds, valuables or property of the bank, and that these words could have no application to the duties of that position. But we find in the condition of the bond the words : and shall faithfully apply and account for all such moneys, funds, valuables and property which may come into his hands or under his control as such clerk.”

If it had not been intended by the use of the word clerk to apply -to all the positions which employees of the bank ■occupied, and of which the teller is one, why should these words in reference to the moneys, funds, valuables and property of the bank have been added ? It would seem, •therefore, that it was the intention of the parties that the ■obligors should be bound for the faithful discharge of the duties of the principal in whatever capacity he might be ■employed in such bank, and that all the subordinate positions of the bank were classed together under the generic name •of clerk. Indeed, there seems to be no distinction, as far as to whether he is a clerk or not, between the positions of book-keeper and of teller.

Our attention is called to some definitions from lexicographers. It is true that a teller is there called an officer of the bank, but in law he occupies no such position. His •duties are entirely clerical, as much so as those of any other employee of the bank.

It would appear, therefore, that the condition of the bond in question was broken, and that there was a right to recover upon the part of the appellant.

The judgment should be reversed and a new trial ordered, with costs to appellant to abide event.

Macombee, J., concurred.

Brady, J. dissenting.

[After stating the facts.]—The learned justice in the court below regarded the case of the National Bank Association v. Conkling (90 N. Y. 120) as decisive of this action, and, therefore, gave judgment for ••the defendant. It must be said that his conclusion in this regard was correct, for that case seems to fully justify the judgment rendered herein.

We had occasion to consider the result of that case in the Fourth Nat. Bank v. Spinney (47 Hun, 293). There the question was, in many respects, the same as in this, case, and it was held in a direction to the jury that if a principal entered into the employment of the bank as bookkeeper, even if other duties were super-added to that employment, the defendants were liable ; but if he had been virtually removed from the position of book-keeper and put into another position, which enhanced the liability of the-defendants on their bond, then they were entitled to a verdict.

The statement of facts shows conclusively, that the-principal herein was advanced to the position of teller, the-d uties of which he discharged and the performance of which-relieved him from those of a book-keeper eo nomine, enlarging his responsibilities, and placing him in a position by which he was enabled to make the misappropriations complained of.

It will be observed that the condition of the bond in-regard to the faithful application of and accounting for all moneys, etc., which might come into the hands of Bauman,, relates to those received by him as. such clerk. The language is : “ property which may come into his hands or under his control as such clerk.”

In Webster’s Dictionary (edition of 1828), the words “clerk” and “teller” are defined as follows: Clerk, “a writer; one who is employed in the use of the pen in an office, public or private, for keeping records and accounts ; as the clerk of a court.” Teller, “an officer of a bank, who receives and pays money on checks.” And Worcester, Stonnouth, Bouvier and Jacobs give substantially the same-definition ; and it appears to have been adopted by the court of appeals in People v. Fire Commr’s. (73 N. Y. 437).

The phraseology of the condition of the bond in this case-seems to express clearly the intention of the surety, that his responsibility should be limited to such misconduct as his principal might commit whilst discharging his duties as a clerk eo nomine / but if it be not confined to this restricted effect, it certainly calls for the application of tire rule established in Nat’l. Banking Association v. Conkling and Fourth Nat’l. Bank v. Spinney (supra).

An examination of the requests to find submitted on behalf of the appellant has not created an impression that any wrong was done by refusing them, and the exception to the evidence is subject to the same criticism. All the facts are before the court necessary on the evidence submitted to determine the liability of the defendants, applying to them the well-established rules governing such relations as are created by the bond in question. The facts found rest chiefly upon the testimony given on behalf of the plaintiff.

It may be said with great propriety that an abstract question of law only is presented, and that is whether the appointment of the principal as teller and the' consequent suspension of his duties as book-keeper was one which relieved the defendant from the obligations he assumed when he executed the bond. As we have seen, such a change in the position and duties of the principal relieved him from any obligation.

The judgment should, therefore, be affirmed, with costs.

Judgment reversed and new trial ordered, costs to abide event.

Defendant appealed to the court of appeals.

Theodore De Witt, and Geo. C. De Witt, Jr. (De Witt, Lockmann & De Witt, attorneys) for appellant.—I. The surety-was discharged from the obligation óf the bond by the removal by the plaintiff of Baumann from the position he held vhen the bond was given (Nat. Mechanics’ Banking Asso. v. Conkling, 90 N. Y. 116; First Nat. Bk. of Baltimore v. Gerke, 13 Atl. Rep. 358; 12 Cent. Rep. 129; Manufacturers’ Bk. v. Dickerson, 41 N. J. Law Rep. 448; Fourth Nat. Bk. v. Spinney, 47 Hun, 293; People v. Vilas, 36 N. Y. 460; Cornell v. Eagan, 13 Daly, 505).

II. As to the construction of the bond (First Nat. Bk. of Baltimore v. Gerke, 13 Atl. Rep. 358; 12 Cent. Rep. 129; People v. Fire Commissioners, 73 N. Y. 337, 442; Pohalski v. Mutual Life Ins. Co., 36 Super. Ct. R. 234; McCluskey v. Cromwell, 11 N. Y. 593, 598; Nat. Mechanics’ Banking Asso. v. Conkling, 90 Id. 116).

III. The bond does not cover the position of teller (Nat. Mechanics’ Banking Asso. v. Conkling, 90 N. Y. 116; Hayden v. Crane, 1 Lans. 181; Russell v. Clark’s Exrs., 7 Cranch, 69).

IV. The case of Mayor v. Kelly, 98 N. Y. 467, does not affect this case.

V. The trial justice committed no error in admitting the evidence objected to by the plaintiff (Griffiths v. Hardenburgh, 41 N. Y. 464, 468).

Wm. H. Arnoux (Arnoux, Ritch ds Woodford, attorneys) for respondent.—I. Upon both authority and principle the surety is liable to the plaintiff for the default of his principal, upon the bond in question (Nat. Mechanics’ Banking Asso. v. Conkling, 90 N. Y. 120; Mayor v. Kelly, 98 Id. 471; Nat. Bk. of Baltimore v. Gerke, 13 Atl. Rep. 358; 12 Cent. R. 129; Manufacturers’ Bk. v. Dickerson, 41 N. Y. L. R. 448; Fourth Nat. Bk. v. Spinney, 47 Hun, 293; Rochester City Bk. v. Elwood, 21 N. Y. 88; Gaussen v. U. S., 97 U. S. 584; Pybus v. Gibbs, 6 Ell. & B., 88 Eng. L. C. 902; Bonar v. McDonald, 3 N. L. Cas. 226; Napier v. Bruce, 8 C. & F. 470; Eastern R. Co. v. Loring, 138 Mass. 381; Horey v. Ten Broeck, 3 Rob. 316; Conant v. Van Schaick, 24 Barb. 87, 99; Penn. etc. R. R. Co. v. Leuffer, 84 Pa. St. 168; 24 Am. 180; Erricson v. Brown, 38 Barb. 340; Gurney v. Atlantic, etc. R. R., 2 T. & C. 446; Missouri, K. & T. R. R. v. Baker, 14 Kans. 566; Coffin v. Reynolds, 37 N. Y. 640; People v. Fire Commissioners, 73 Id. 442).

II. The judge erred in admitting testimony of conversation between the surety and principal, and basing a finding thereon (Hurd v. Kelly, 78 N. Y. 588; Dillon v. Anderson, 43 Id. 231; Russell v. Freer, 56 Id. 67; Griffiths v. Hardenburg, 41 Id. 464).

III. The court erroneously refused to find as requested by the plaintiff (Sheldon v. Merch. Desp. Co., 59 N. Y. 258).

The court of appeals affirmed the order upon the opinion of Van Bbust, J., above given.  