Rochester City Bank v. Elwood (21 N.Y. 88, 1860)

Wright, J.

The evidence would have justified the jury in finding that, about the 5th of January 1853, Gold, who had acted as assistant book-keeper in the Rochester City Bank, for two years previously, embezzled the sum of $1,000 of its funds;.and made false and fraudulent entries in the books of the bank, with the view and for the purpose of concealing from observation and detection such embezzlement, until he could placo the property beyond the reach of reclamation. In March 1851, the defendant Elwood obligated himself to the plaintiff, as the surety of Gold, that the latter should faithfully discharge the trust reposed in him as an assistant bookkeeper of the bank. The single question is, whether the embezzling of the funds by Gold, under cover of false entries in the books of the bank, was a breach of the undertaking of the surety.

It is important to ascertain the nature and extent of the engagement of the surety, as indicated by the written contract. *Though the rule of strict construction ° in favor of a surety excludes implied engagements, and calls for exact performance of express stipulations, it has no application to the construction of the written undertaking; in this respect, there is no difference between the contract of a surety and that of any other party. The instrument, in this case, by which the parties become bound, is to be construed, no less as to the surety, than the principal, with reference to the situation of the parties, and the hazards against which the plaintiff exacted security, as a condition to introducing an employee into the bank.

The language of the instrument is peculiar. It recites that Gold has been appointed assistant book-keeper of the Rochester City Bank, and the engagement of principal and surety follows, that “ he shall faithfully discharge the trust reposed in him as such assistant book-keeper as aforesaid.” Now, within the intention of the parties, was this ■ simply an undertaking that Gold would keep, with reasonable skill and care, such books of the bank as he might properly be required to keep as assistant bookkeeper, and nothing more? If it was, then not only the surety but the principal, would be absolved from liability on the undertaking, even though the latter, availing himself of the facilities afforded by his fiduciary position,, should defraud the bank or suffer it to be defrauded. If Gold, taking advantage of the opportunities which his position afforded him as an employee of the bank, should himself abstract, of permit others to abstract the funds or property of the bank, his act would not fall within the scope of his or his surety's contract, provided they only intended, by such contract, to vouch for his care and skilfulness as a book-keeper, and not for his honesty or fidelity to his trust as an employee of the Bank. I do not think the undertaking can be so read or construed.

I agree, that the surety cannot be holden beyond the fair scope of his engagement, as intended by the parties, when.undertaken; but the question is, what was this intention, as expressed in the instrument, construed in the light of the circumstances surrounding its execution. Gold had been selected for a post in a banking institution, which brought him into close and constant ^proximity with its money and property. His place was behind the counter of the institution, and, practically, he had nearly the opportunity of the cashier or teller to embezzle the funds of the corporation, and a better one to conceal such embezzlement, and prevent its immediate detection. The receiving and paying out of the money of the bank was done by the cashier or teller, but it was not their duty to keep constant and exclusive watch over.it. The temptation to purloin money constantly besets those employees of a bank who are directly within reach of it. These things are presumed to have been known to the parties; and under the circumstances, the defendant Elwood guaranties that the appointee shall faithfully discharge a trust, as one of its employees, reposed in him by the bank. Now, can it fairly be said, that the parties only contemplated, and Elwood only intended, a guarantee that Gold should keep the books of the bank correctly, and that if a loss ensued from a default in this respect, he would respond to the extent of such loss? I think not. It will not be pretended, that this was all the obligation intended, and resting upon Gold by virtue of the contract; and the obligation assumed by the surety was co-extensive with that of the principal. The bond exacted was in the penal sum of $5000, and it is scarcely supposable that, in the contemplation of the parties, it was merely intended to indemnify the bank against injuries resulting from Gold’s unskilfulness or negligence as a book-keeper, and not against his dishonesty or infidelity to his trust as an employee of the bank. It seems to m