Opinion
(June Term, 1828.)
1. The order in which parties to a security are liable at law is the order in which, independently of contract, they will be held bound in equity.
2. In equity, however, by contract the endorser may be made accountable to the maker and the acceptor to the drawer, etc.
3. Where A., as surety, signed the note of B., payable to C., and it was endorsed by C. at the request and for the accommodation of B., there being no contract between A. and C. whereby they agree to become cosureties of B.: It was held, that A. had no right to contribution from C.
From JOHNSTON. The bill charged that the plaintiff's intestate in March, 1825, signed a note with one Robert H. Helme, payable to the defendant, for $8,911; that after signing the note, it was delivered to Helme, who procured the defendant to endorse it; that the signature of the plaintiff's intestate and the endorsement of the defendant were both voluntary and for the accommodation of Helme, who procured the note to be discounted at the State Bank solely for his own benefit; that Helme became insolvent, and the plaintiff's intestate had paid the whole amount of the debt. It was insisted that the defendant was a cosurety with the plaintiff's intestate and liable to contribution, which was the prayer of the bill.
Badger and Devereux for plaintiff.
(174) The defendant in his answer admitted that he endorsed the note at the request of Helme; he averred that at the time of his endorsement he had no knowledge that the plaintiff's intestate was a surety, but that he then believed the plaintiff's intestate had a joint interest with Helme in having the note discounted. He denied that he would have endorsed the note for the accommodation of Helme, had he known that the latter was solely interested in the discount, and stated that when the note was handed to him, and his endorsement asked for, he hesitated, as the amount was large, but that Helme removed those doubts by informing him that he, the defendant, could not suffer until the plaintiff's intestate and himself had both failed; and upon this assurance, having confidence in the solvency of the former, he endorsed the note and handed it back to Helme.
The deposition of Helme was read upon the hearing. He swore that at the time when the defendant endorsed the note no communication was made to the defendant of the relation in which the plaintiff's intestate stood to the note; that he had stated to the defendant that the plaintiff's intestate was bound to indemnify him in case he, Helme, failed; but that this was given as the witness's opinion upon the point of law, not as a fact touching the plaintiff's intestate's connection with the note. He further proved that the plaintiff's intestate had no interest in the note, except as a surety, and that in his opinion the defendant would not have lent his name unless that of the plaintiff's intestate, or some other as good, had been upon the face of the note.
Love v. Wall, 8 N.C. 313, and Craythorn v. Swinburn, 14 Ves., 160, decide not only that the order of liability arising upon the face of the transaction is the rule of this Court, as well as at law, in fixing the relation of principal and surety and that of cosurety and supplemental surety, but that this relation may be varied by contract, whatever may be the form of the security, for that is made diverso intuito; and that the payer of the note may be the surety of the maker, the endorsee of the endorser, drawer or acceptor. But until this relationship is varied by evidence of such contract, the order of liability is the same here as at law, that is, such as it appears to be upon the face of the security. This seems to be admitted in argument by the counsel for the plaintiff; but it is insisted that the very circumstance of its being known to the defendant that the plaintiff's intestate, one of the makers, was not a principal in the note, but only a surety for Helme, (179) created of itself this agreement of mutual liability between the maker and endorser, without any actual communication between them, and, in fact, that this was so strongly the case that no understanding of the defendant to the contrary, in the absence of the plaintiff's intestate, and without his knowledge, could control or vary it. This is certainly extending the doctrine farther than the principle will warrant. It is binding a person not only without his consent, but in opposition to it, and where no fraud is imputed to him; it is placing him in a grade and order of liability which is in accordance with neither his act nor his intent, and this without the least imputation of fraud. This case certainly is distinguishable from Craythorn v. Swinburn. There the surety became bound, or was willing to become bound, with his principal. He did not and could not understand that any other person was to be bound as cosurety with him. In this case it is probable that Smith, the maker, might have understood and believed that the defendant would be equally bound with him, as the note could not be discounted without his agency; but if he did, this could not create an obligation on the endorser without his assent, and without fraud. His (the intestate's) understanding alone would not change the operation of law upon the transaction. It required also the assent of the endorser, or that he should be guilty of some fraud, to subject him. To do so in this case would be to subject him in opposition to the manner in which he bound himself, viz., the form of the security, and also in opposition to what he intended to do, according to his declarations at the time of endorsing.
PER CURIAM. Dismiss the bill with costs.
Cited: Richards v. Simms, 18 N.C. 49; Dawson v. Pettaway, 20 N.C. 399; Bank v. Burch, 145 N.C. 318; Edwards v. Ins. Co., 173 N.C. 617.
(180)