Phelps v. Garrow

8 Paige Ch. 322 | New York Court of Chancery | 1840

The Chancellor.

The complainants drew the draft in this case, payable to the order of the defendant, supposing, as they allege, that his endorsing it would make him liable to them as a surety for Smith the drawer. And the defendant admits that he endorsed his name upon the draft, at the request of Smith, supposing that by so doing he had thereby become liable to pay the amount of the draft to the complainants, as surety for Smith, in case the same was not paid by the drawee. The question therefore arises whether this court can relieve the complainants against this mistake in law, so as to charge the defendant as a surety for a debt for which he intended or expected to become liable, but for which he did not in fact contract any legal liability to them. Upon a full consideration of the case I have not been able to discover any equitable principle which can authorize this court to interfere, if the complainants have no legal defence to the suit which the defendant has brought against them to recover back the money which he paid to the bank as the endorser of this bill. It is perfectly clear that tSfe payee of a draft who endorses the same does not contract any legal liability to the drawers, in case of the failure of the acceptor to pay the draft at maturity. But on the contrary, if such endorser is obliged to pay the draft to a subsequent holder thereof, as Garrow was compelled to do in this case, he may sue the drawers upon the bill to recover the amount from them. The intention of the defendant to become security for Smith, or rather his supposition that by endorsing the draft he had become such security, could not make him either legally or equitably liable to the complainants as such security, without consideration. And nothing short of a written agreement could render him liable as a surety for Smith, under the provisions of the statute of frauds. Even if the complainants had sold their goods upon the faith of a previous promise by the defendant, that he would become legally bound as surety for the payment of the debt, there might be still a difficulty in rendering him liable consistently with the provisions of the statute of frauds ; unless he had been guilty of some fraudulent device which would authorize a court of equity to interfere. Here, however, the defendant did not even authorize his name to be used until after the goods had been sent to Smith. His mistake, therefore, in supposing he had become a surety for Smith, by endorsing the draft, when he had not become so either in fact or in law, raises no equity in favor of the complainants against him.

The injunction must therefore be dissolved; leaving the complainants to their defence at law, if they have any such defence to the suit against them on the draft.