tificate. In view, however, of the uncontra- | cashier of a bank, speaking generally, is the dicted testimony tending to show that in knowledge of the bank as to any matter the course of the transactions relied upon that does not come within the customary or the president had, either by conduct or ex-ordinary duties of a cashier or those which planation, produced the impression on the have been specially imposed upon him by bank that the transactions were bona fide, the action of the bank. I do not think Mr. and therefore relieved the bank from any R. E. Reutlinger, in this case, in respect to dissatisfaction as to the transactions, it any matter which he knew or could do, repmust follow that the falsity of the certifi- resented the bank, if it was outside of his cate could alone have been inferred by con- ordinary duties; and I do not recall anycluding either that the transactions in and thing that he knew, so far as the proof of themselves were of such a character that, shows, that would in anywise affect the liaas a matter of law, no explanations made of bility of the defendant in this case." them by the president could have justified the bank in being satisfied on the subject, [359]or that the surrounding circumstances were such as to authorize the jury to infer that the bank must have known of the fraud, and therefore to find that the bank could not possibly have been satisfied with the conduct of the president. But the first hypothesis we have pointed out was inadmissible. The second was left to the jury to determine, since the charge of the court was that if the jury could deduce from the proof knowledge on the part of the bank of the fraud of the president. the surety company would not be liable on the bond. As, therefore, the very question which the jury would have been called upon to determine if the certificate pad been received in evidence was fully submitted to them and was necessarily negatived by their verdict, no foundation exists for holding that prejudicial error resulted from excluding the certificate. 5. The trial court erred in not instructing the jury that the knowledge possessed by an officer or director of the bank, of the fraudulent purposes of McKnight, though such knowledge had not been communicated to the bank, should be treated as the knowledge of the bank; and also erred in not in structing the jury that the knowledge which any oflicer or director of the bank might have acquired of the fraudulent conduct of McKnight, if such officer or director had exercised customary supervision, should be imputed to the bank. Objection was made to the foregoing portion of the charge, on the ground that the knowledge of the cashier of the acts of MeKnight in respect to his overdrafts, his transactions in connection with the $2,000 note signed by the two aldermen and with the checks to Edmunds, and the several checks for McKnight's individual account, was the knowledge of the bank, and that the jury should have been so told. Instruction No. 7 dealt with the $2,000 note transaction. In effect, the jury were instructed that the knowledge of the cashier acquired in the performance of his du ties might be imputed to the bank, but that the vice president or an individual director did not hold such an official relation to the bank as that his knowledge of wrongdoing by McKnight, if not communicated to the bank, could be treated as the knowledge of the bank. We do not deem it necessary to analyze the instructions given by the court for the purpose of determining whether they were in all respects accurate, because we are of the opinion that if the court in anywise erred it was in giving instructions which were more favorable to the defendant surety than was justified by the principles of law applicable to the case. It is well settled that, in the absence of express agreement, the surety on a bond given to a corporation, conditioned for the faithful performance by an employee of his duties, is not relieved from liability for a loss within the condition of the bond by reason of the laches or neglect of the board of directors, not amounting to fraud or bad faith.|361] and that the acts of ordinary agents or em ployees of the indemnified corporation, conniving at or co-operating with the wrongful act of the bonded employce, will not be im Kirkpatrick (1824) 9 Wheat. 720, 736, 6 L. ed. 199, 203; Minor v. Mechanics' Bank (1828) 1 Pet. 46, 7 L. ed. 47; Taylor v. Bank of Kentucky (1829) 2 J. J. Marsh. 564; Amherst Bank v. Root (1841) 2 Met. 522; Louisiana State Bank V. Ledoux (1848) 3 La. Ann. 674; Pittsburg, Ft. W. & C. P. Co. v. Shacffer (1868) 59 Pa. 350, 356: Atlas Bank v. Brownell (1869) 9 R. I. 168, 11 Am. Rep. 231. The doctrine of these cases is thus epitomized in 59 Pa. 357: The questions which these propositions embrace were raised by the exceptions taken to certain portions of the charge to the jury, referred to in the record as instructions Nos. 5, 6, and 7. In instruction No. 5 the court told the jury, in general terms, that the bank, under the stipulations contained in the bond, owed to the surety the duty of ex-puted to the corporation. United States y ercising due and customary supervision over McKnight to prevent the commission by him of fraudulent acts, and further instructed that if the bank knew of the fraudulent purposes of McKnight in connection with the drafts and checks upon which recovery was sought, the surety would not be liable. Exception was taken to this instruction, on the ground that it "did not submit correctly to the jury consideration of knowledge on the part of the officers or directors of the bank other than McKnight, which they had, or would have had, if customary supervision [360] *had been exercised." Instruction No. 6, and the objection made to it, reads as follows: "I do not think that the knowledge of a "Corporations can act only by officers and agents. They do not guarantee to the sureties of one officer the fidelity of the others. The rules and regulations which they may establish in regard to periodical returns and payments are for their own security, and as to which the court was instructing the not for the benefit of the sureties. The sure-jury in the portions of the charge under conties, by executing the bond, became responsideration, is as follows: sible for the fidelity of their principal. It ""That the employer shall observe, or is no collateral engagement into which they cause to be observed, due and customary suenter, dependent on some contingency or pervision over the employee for the prevencondition different from the engagement of tion of default, and if the employer shall their principal. They become joint obligors at any time during the currency of this with him in the same bond, and with the bond condone any act or default upon the same condition underwritten. The fact part of the employee which would give the that there were other unfaithful officers and employer the right to claim hereunder, and agents of the corporation, who knew and shall continue the employee in his service without written notice to the company, the connived at his infidelity, ought not in reason, and does not in law or equity, relieve company shall not be responsible hereunder them from their responsibility for him. for any default of the employee which may They undertake that he shall be honest, condoned." " occur subsequent to such act or default so though all around him are rogues. Were the rule different, by a conspiracy between the officers of a bank or other moneyed institution, all their sureties might be discharged. It is impossible that a doctrine leading to such consequences can be sound. In a suit by a bank against a surety on the cashier's bond, a plea that the cashier's defalcation was known to and connived at by the officers of the bank, was held to be no defense. Taylor v. Bank of Kentucky, 2 J. J. Marsh. 564." So, also, in 3 La. Ann. 674, the court, after suggesting the distinction between the knowledge of the governing body of a bank, the board of directors, of the default of a [362]bonded employee, *and the knowledge of such default by another officer or employee, not communicated to the board, thus tersely stated the applicable doctrine (p. 684): "It cannot be said that if one servant of a bank neglects his duty, and by his carelessness permits another servant of the bank to commit a fraud, the surety of the fraudulent servant shall be thereby discharged." And see American Surety Co. v. Pauly, 170 U. S. 156, 157, 42 L. ed. 986, 18 Sup. Ct. Rep. 552, and cases cited. In other words, the principle of law discussed in the case of The Distilled Spirits, 11 Wall. 356, sub nom. Harrington v. United States, 20 L. ed. 167, riz., that the knowledge of an agent is in law the knowledge of his principal, is inten led for the protection of the other party (actually or constructively) to a transaction for and on account of the principal had with such agent. In the very nature of things, such a principle does not obtain in favor of a surety who has bonded one officer of a corporation, so as to relieve him from the obligations of his bord, by imputing to the corporation knowledge acquired by another employee subsequent to the execution of the bond (and from negligence or wrongful motives, not disclosed to the corporation), of a wrong committed by the official whose faithful performance of duty was guaranteed by the bond. As the rule of imputation to the principal of the knowledge of an agent does not apply to such a case, it must follow that it can only obtain as a consequence of an express provision of the contract of curetyship. Was there such a provision in the bond now under consideration? Now the clause of the bond sued on, and *Manifestly, this stipulation is not fairly (363) subject to the construction that it was the intention that the neglect or omission of a minority in number of the board of directors or the neglect or omission of subordinate officers or agents of the bank should be treated as the neglect or omission of the bank. The provision is not that a minority in number of the board of directors or that subordinate officers or agents would exercise due and customary supervision, and would not condone a default of the bonded employee or retain him in his employment after the commission of a default, but the agreement is that the bank would do or not do these things. This in reason imports that the things forbidden to be done or agreed to be done were to be either done or left undone by the bank in its corporate capacity, speaking and acting through the representative agents empowered by the charter to do or not to do the things pointed out. To hold to the contrary would imply that the bond forbade the doing of an act by a person who had not power to perform or commanded performance by one who could not perform. Assuredly, therefore, the conditions embodied in the stipulation to which we have referred, both as to doing and nondoing, contemplated in the reason of things the execution of the duties which the contract imposed on the bank, either by the governing body of the bank, its board of directors, or by a superior officer, such as the president of the bank, having a general power of supervision over the business of the corporation. and vested with the authority to condone the wrongdoing or to discharge a faithless employee. That is to say, the stipulation in all its aspects undoubtedly related to the bank, acting through its board of directors or through an official who, from the nature of his duties, was in effect the vice principal of the bank. The decision in Guarantee Co. of N. A. v. Mechanics' Sav. Bank & T. Co. 183 U. S. 402, ante, 253, 22 Sup. Ct. Rep. 124, it may be remarked, in passing, is not antagonistic to the views we have just expressed, because in that case all the information which was held imputable to the bank had been communicated to the president of the bank. Now, applying the principles previously expounded to the case in hand, it is evident that the court rightly refused to instruct the jury that the mere knowledge of one or more | Argued April 25, 1902. Decided June 2, [364] directors, *less than a majority of the board, 1902. and of the vice president of the bank, of the said, when the charge which the court gave 6. The court of appeals erred in affirming In considering the clause of the charge to the jury which provided that "due and customary supervision over the employee" should be observed "for the prevention of default," the trial court told the jury that it imported "a reasonable vigilance upon the part of the bank to prevent defaults," that is, to prevent the commission of fraudulent acts by McKnight. To instruct the jury in broad terms that if they found that the directors were careless in the management of the bank generally they should find for the defendant, could only have served to mislead. The court did not err in refusing the requested instruction. Judgment affirmed. Mr. Justice Gray and Mr. District of Columbia to review a decree which affirmed a decree of the Supreme Court of the District ordering a conveyance, on compliance with certain conditions, to the complainant in a suit to set aside a conveyance of realty. Reversed. See same case below, 17 App. D. C. 104. Statement by Mr. Justice White: appellee herein, filed a bill in the supreme On September 1, 1896, Lily Alys Godfrey, court of the District of Columbia, sitting in equity, to establish her title to five lots of land situated in the city of Washington, of which it was asserted she had been defrauded by one Stephen A. Dutton. The defendants to the bill were Dutton and wife, Louis W. Richardson, Fred M. tion to the defendant Richardson. The lat- [365]*BRAINARD H. WARNER and Louis D. constructive, of any equity of the complain Wine, Appts., v. LILY ALYS GODFREY. (See S. C. Reporter's ed. 365-380.) Appeal-remanding cause for amendment to 1. 2. A case cannot be remanded by an appellate court for the purpose of allowing the complainant to amend a bill in order to assert a new and distinct ground of relief. if the defendants are deprived by such mandate of all opportunity to interpose any defense. ant: that, through his brokers or agents, B. H. Warner & Co., he had paid full consideration to Dutton for the property, and he an nexed to the answer, as a part thereof, the contract of purchase from Dutton, a copy of which is in the margin.† *On March 28, 1897, a decree pro confesso[367] was entered as to one of the lots of land affected by the bill, which is not involved in this controversy, and title to which remained in Dutton. By the decree the legal title to said lot was established in the complainant. By an amended bill filed on May 1, 1897. Warner and Wine were made defendants to the cause. The amendment added to the Parties who, with knowledge of all the "Brainard H. Warner. Clarence B. Rheem. [No. 191.] "Articles of agreement, made and entered into this 10th day of April, A. D., one thousand eight hundred and ninety-six, by and between -, party of the first part, and Louis W. Richardson, party of the second part, in manner and form following: The said party of the first part in consideration of the sum of five hundred (500) doliars to his agents, B. H. Warner & Co., duly paid as a deposit, the re that the conveyance to Richardson was without consideration, the following: ty thousand dollars could readily be negotiated on the security of said property, and stated that if he would return the following week she would have everything in readiness to complete the transaction. Accordingly the said Dutton came again to the said city of Washington on or about the 10th day of April, then next, and, going to the office of said B. H. Warner & Co., then and there signed a paper-writing or contract agreeing to sell all of said lots in square 134 at and for the grossly inadequate price of $25.000, said sum being less than one half the price or consideration at which the said B. II. Warner & Co. had been authorized to sell the said lots by said Mary Alice Godfrey." "That the said Richardson was only a nominal party to the said transaction; the real parties were the said Dutton, on the one part, and Brainard H. Warner and Louis D. Wine, on the other; that the said Wine and Warner pretend that they advanced or furnished to the said Dutton the sum of six thousand five hundred and eighty-six and 180 ($6,586.33) dollars, and took from the said Dutton the said conveyance to the said Richardson to secure the repayment of the said sum so claimed to have been advanced. Whether said Warner and Wine actually furnished said Dutton such sum or any sum whatsoever the complainant cannot affirm After averring that, by reason of the ciror deny, and demands strict proof in that be- cumstances referred to, the defendants were half, and she avers that the said Warner put upon notice as to whether Dutton had and Wine had such notice of the frauds of honestly acquired the property, it the said Dutton as herein set forth, and of charged that it was the duty of defendants such facts and circumstances as put them to have notified the complainant of the propon inquiry as to the conveyance to said Dut-osition of Dutton, but that no notice, in fact, ton, that in equity they should have no benefit from said conveyance to said Richardson, but the same should be decreed to be canceled and held for naught.” was was given. It was averred, moreover, that the said firm and the defendants Warner and Wine "purposely and intentionally concealed the fact that the said Dutton had signed the aforesaid contract to sell said lots at and for the grossly inadequate sum of $25,000, and that he was eager and anx On July 17, 1897, before any pleading by Warner and Wine, an amended and supplemental bill was filed, accompanied with numerous interrogatories required to be an-ious to dispose immediately of said lots so swered by the defendants Warner and Wine. soon after acquiring the same.” And furThe averments of the original bill as to the ther, it was averred that "the said defendfraudulent practices by which Dutton had ants, Warner and Wine, immediately set obtained the property of complainant were about the acquisition of said lots for their reiterated. As respects the defendants own benefit, and, with a view to, and for the Warner and Wine, it was charged that Dut-purpose of, concealing their connection with ton, on March 29, 1896, with the object of said transaction, caused the title to the said consummating the frand which he had prac-, lots to be conveyed to defendant Richardson tised upon the complainant, "entered into by a pretended deed, bearing date the 13th negotiations with said B. II. Warner & Co., day of April, 1896," and that said Richardor said defendants, Warner and Wine, son. because of his youth and inexperience through one Ellen S. Mussey, a lawyer of and his relationship to the defendant Wine, said city, to whom he applied for a loan on and his connection in business with the firm [368]the security of this complainant's said prop-of B. II. Warner & Co.. "was chosen as the erty, and on information and belief this instrument or tool of the said defendants complainant charges that said Ellen S. Mus Warner and Wine, *for the consummation ei 369) sey, after bringing the matter to the atten- their schemes to get possession of this comtion of the said B. H. Warner & Co., or said plainant's said property for the said grossWarner and Wine, reported to the said Dut-ly inadequate sum of $25,000.” ton that a loan of from twenty-five to thirceipt whereof is hereby acknowledged, hereby, agrees to sell unto the party of the second part, the following-described real estate in the city of Washington and District of Columbia: Lots 66, 1, 2, and 3, square 134, Washington. D. C. "For the sum of twenty-five thousand (25,000) dollars, which the said party of the sec ond part agrees to pay to the said party of the! first part as follows: "Seventy-five hundred (7,500) cash, balance seventeen thousand five hundred (17.500) to be assumed, secured by deed of trust on the said described property, with interest at the rate of six per cent per annum, payable which amount is now upon the property and secured by a trust or trusts, and the said party of the first part, on receiving such payment at the time and in the manner above mentioned, shall execute, acknowledge, and deliver to the said party of the second part, or to his heirs as assigns, a special warranty deed and conveyance, assuring to them the fee simple of the said premises free from all encumbrances, except as A joint and several answer was filed on to the trust referred to above, which deed shal' contain the usual full covenants. The terins of sale to be complied with in five days from the date hereof, and said deposit to be applied in part payment of the purchase of the said described real estate. Title to be good and marketable or deposit returned. "And it is understood that the stipulations aforesaid shall apply to and biad the heirs. executors, administrators, and assigns of the respective parties. : "In witness whereof the parties to thes presents have hereunto set their hands and seais the above day and date. behalf of Warner and Wine, and therein it was averred that the lots in question were bought by them in good faith for an adequate consideration, and that the title was taken in the name of Richardson merely for the purpose of convenience in making subsequent conveyances. Issue having been joined, testimony was taken, and in all about one hundred and forty witnesses were examined. But a portion only of the evidence, embodied in 600 printed pages, has been submitted for the inspection of this court. The court below, however, referred to the record as an "immense" one, and it was stated that the greater part of the evidence consisted of the testimony of witnesses introduced to contradict on the one hand, or to support on the other, the denial of the defendant Warner, made under oath in his answer to the amended bill and in answers to special interrogatories, that he had had any acquaintance with Dutton, or ever had any business relations with him of any description until the transaction of April, 1896. This latter testimony is not contained in the printed record filed in this | by them to Dutton for the property and such further sums as might have been paid by them in the discharge of taxes and encumbrances. The ground for this conclusion was as follows: That the testimony showed that the firm of B. H. Warner & Co. were the agents of Dutton in negotiating the sale; and as it was further shown that Richardson, the purchaser named in the contract, was only an ostensible buyer, and that Warner and Wine, members of the firm of B. H. Warner & Co., were the real purchasers, and as it appeared that the fact of the purchase by Warner and Wine was not made known to Dutton, the latter would have had a right by a "timely bill filed for that purpose," to set aside the sale on the ground that his agents had been unfaithful to their trust by buying the property of their principal for their own account without the knowl edge and consent of their principal; that this right, thus existing in Dutton, might be availed of in equity by the complainant, as the equitable owner of the property. As, however, the court found that the act of Warner and Wine in buying the property through their firm, as agents of Dutton, inThe trial court decreed in favor of the de- volved no intentional wrong, but constifendants. In the opinion by it delivered the tuted a mere legal or constructive fraud, it evidence respecting the different circum- was held that the complainant in order to stances relied upon by the complainant to obtain equity must do equity, and that she establish her case was reviewed, and it was could not avail of her right to disaffirm *the[371] held that the evidence was inadequate to purchase by Warner and Wine without resupport the charge of either actual or con-imbursing them for the money actually paid structive fraud on the part of the defendants Warner and Wine. court. Respecting one of the alleged circumstances charged to constitute a badge of fraud, riz., that Warner and Dutton were ac quainted and had business dealings together prior to the sale in question, the court upheld the contention of Warner that he had had no acquaintance or dealings with Dutton prior to said purchase. Referring to the evidence on this branch of the case, the court said: "A most careful examination has satisfied me beyond doubt that the entire testimony adduced in behalf of the complainant 370]* designed to show that Warner was ever in the company of Stephen A. Dutton on either of the occasions as described is absolutely untrue, and that by far the greater part of it consists of unfounded falsehoods, uttered from bad motives and attempted to be sustained by deliberate perjury." by them to Dutton, and such other sums, if any, paid by them in the discharge of taxes and encumbrances, less such sums as had been received, or ought in the exercise of due diligence to have been received, as rents and profits of the property. After deciding that upon such payment the defendants should be decreed to reconvey the property to the complainant, the court said (16 App. D. C. 117): "It may be that, to obtain this relief, the bill will have to be amended to some extent. If so, it can be done without reopening the case for further testimony. Doubtless, too, a reference to the auditor will be necessary for a statement of the account between the parties before a final decree can be entered. "It follows that the decree dismissing the bill must be reversed, and the cause remanded, with directions to vacate the said decree, and take such further proceedings in accordance with this opinion as may be expedient and proper. "The costs of this appeal will be divided equally between the parties." an The appellate court coincided with the opinion of the trial court, that the evidence introduced at the hearing failed to sustain the claim that there had been either actual Upon the filing of the mandate of the or constructive fraud, as alleged in the bill, court of appeals in the supreme court of the on the part of Warner and Wine, and that, District, the complainant prepared on the contrary, the proof showed there was amendment to the bill, in which it was averno ground for awarding the relief prayed in red that the defendants Warner and Wine, the bill. It was, however, held that "from as members of the firm of B. H. Warner & another point of view, made clear by the tes- Co., were agents of the defendant Dutton to timony, though it may not be specifically find a purchaser for the lots in question; presented by the pleadings," the complain- that said defendants did not inform Dutant, standing in the stead of Dutton, was ton that they were the real purchasers entitled to disaffirm the sale and recover the of the lots; that in consequence of such property from Warner and Wine on repay-fact the purchase was fraudulent at law ing to said defendants the price actually paid and voidable at the election of Dutton or |