Harrington v. Wright
48 Vt. 427
Vt.
1876
Check Treatment

The opinion of the court was delivered by

Boyce, J.

In Bank of St. Albans v. Smith, 30 Vt. 148, it is said that “ under the uniform course of decisions in this state, it was competent to show by parol that the defendant was but a surety on this note; and if this be known to the holder of the *431paper, he stands on the same ground he would have done if the defendant had affixed to his name the word surety.” All the cases cited upon this point show that in a suit in the name of the payee of the note against one or all of the signers, it is competent to show the relation that existed between the signers at the time the note was executed. If the relation of any of the signers is shown to be that of a surety, and this fact is known to the holder or payee at the time he receives the note, such signer is entitled to avail himself of all the privileges and rights that pertain to his character as surety, as against the holder or payee. The court made a proper application of this rule in admitting evidence as to what transpired at the time of the execution of the note, as affecting the liability of the defendants. To justify the verdict which was returned by the jury, they must have found that it was agreed at the time the defendant Wright signed the note, that it should not be used except to take up the other note, nor unless all the signers to the other note signed this; that he was induced to sign the note by this agreement, and that the plaintiff knew it, and knew that it was to be presented to the defendant Sanders with Wright’s name upon it, as an inducement for him to sign it, and that that did induce him to sign it, and that the plaintiff took it knowing that Sanders had been so induced. These facts being found, it must be conceded that the note, as far as the defendants are concerned, was perverted to an use contrary to the agreement made at the time of its execution. The execution of the note, and the agreement as to the use to be made of it, were contemporaneous acts, and were one transaction. If the plaintiff is to be aided in the perversion of the note by enforcing its payment, he is at the same time to be justified in the violation of the agreement made by him that the note should only be used for a purpose named, and in a contingency that' was provided for. We are not acquainted with any principle of law or equity that can be invoked to solve that problem in favor of the claim made by the plaintiff, without a palpable disregard of the ancient maxim that “no man shall take advantage of his own wrong.” None of the authorities cited by the plaintiff will be found upon examination to be in conflict with the view that was taken by the court. The *432question, how far and under what circumstances a surety could avail himself of an agreement between himself and the principal at the time he signed the note, in defence of a suit brought against him upon the note, has been frequently before this court. It was held in Passumpsic Bank v. Gross & Page, 31 Vt. 315, that where there was an agreement between the principal and surety that the principal should not use the note unless the principal obtained another surety on the note, and the principal, in violation of that agreement, procured the note to be discounted by the plaintiff, that the agreement constituted no defence to the surety who signed the note, unless the officers of the bank were aware of the agreement. The same doctrine is held in Dixon v. Dixon et al., in the same volume, 450. These cases were put upon the ground that the parties holding the notes were innocent holders, and that where, through the fraudulent act of a third person, one of two innocent parties must suffer, he who has clothed such third person with the means of perpetrating the fraud, must bear the’ loss. But where the party taking the paper lias notice of the agreement at the time of taking it, he is not an innocent holder, and this rule has no application. Hence, in Farmers & Mechanics’ Bank v. Hathaway, 36 Vt. 539, the distinction above noted is plainly made. Upon a review of all the authorities to which our attention has been called, we hold upon principle and authority, that the rulings of the court upon all the matters excepted to, were clearly correct.

Judgment affirmed.