Delaware gazette and state journal., 1900-01-18
THE DECISION is IMPORTANT
Case of Nathan Lieberman vs..
The First National Bank.
THIRTY THOUSAND AND INTEREST
A Total OF About Thirty-four
Thousand Dollars.
Liebermnn VII, be Proceedsd Against for
the nioney-Hs Was surety on Two Ofiiciai
Bonds of Peter T. Il. smith, Late Paying
Teller of tho First National Bank.
Special Correspondence Of Gazette nnd Iourna

Special Correspondence of Gazette md Journal
Dover, jan. 1.-THE decision of the
Supreme Court yesterday in the case of
Nathan Lieterman VI. the First
National Bank is very important one,
decree having been entered under
which MIR. Lieberman will be pro-
ceeded against for $50, 900 and interest,
making total OF about s34, 900. Mr..
fisherman was surety on two official
bonds Of Peter 7. Z. Smith late pay
ing teller of the First National Bank,
each bond being for Sl5, 600. Upon the
discovery of Mr.. Smiths defalcation In
1893, Judgment was entered upon those
bonds, but q stay Of execution was se-
cured, Mr.. Lieberman carrying the
matter into Chanuery. The Chancellor,
on December 3d, 1898, made decree
dissolving the preliminary Injunction
that Lieberman had secured to restrain
the bank from collecting the amount of
certain defalcRtions Of Smith. Lieber-
man appealed from that decision and
the case Is reviewed by the Supreme
Court, which 6ustains the Chancellor.
During the life OF the first bond, be-
tween November lst, 1870, and July
9th. 1885, Smith abstracted S1l, $50
from the bank, and during the life Of
the second bond, between July 9Th,
1885 and July 5th, 1891. he abstracted
s27, 750. These dcfalcations were con-
ceaied by false entries made by Smith.
They were discovered about February
18th, 1893.
In arguing against the decree Of the
Chancellor, Col. Benjamin Nields, for
Lieberman, held:
That the bonds we're void as to Lieb-
erman because he was induced to be-
come surety thereon by fraudulent rep
resentations of the respondent 1.-THE
bank). That at the time Of the entry
of the judgments, action on the bonds
was barred by the statute Of limita-
tions.
As to the first point, the appellant,
Lieberman, referred 10 conversations
| with George ID Armstrong, cashier of
the bank, who told him Smith was "a
good, reliable, honest man. and to
the bank statements which showed the
condition of the bank. The court holds
that Armstrong's declarations did not
bind the bank. and the bank statements
had no relation to the suretyship. "If
Lieberman saw fit to draw from such
reports the conclusion, that he could
safely become surety on Smith's official
bond, it was upqusstionably his own
volition, and without participation of
the bank, for which the bank should
not be held responsible.
As to the second point, the two years.
| limitation as to an action on a bond
after tho accruing Of the cause Of such
action, the court, after citing numerous
cases, said. "It therefore seems to be
established, that in cases on official
bonds, concealed fraud on the part of
the principal, will deprive both princi.
pal and surety of the benefit of the
statute Of limitations; that the statute
does not begin to run until the fraud
is discovered. 't
"The reason seems to be that in such
bonds the sureties guarantee the good
conduct and faithfulness of the princi-
pal In the discharge Of the duties of his
office, and that in equity and good con-
science, they should not be exempt from
liability for his misconduct and pocu-
lations. when by fraudulent conceal
ment he has prevented discovery until
the time limited by the statute to bring
action has expired"
The court says that ''there Is no claim
that the bank did not exercise good
faith toward the surety at all times, ~
and thus concludes:
"a careful examination Of this case
discloses no ground for the relief OF the
surety. Our judgment is that within
the limits of the penalty of each bond,
he is liable for the defalcation CT
Smith, with interest We therefore
order that the .decree Of the Chancellor
be affirmed .
The bank was represented In the case
by Lewis 9. Vandeerift.