Smith, Stewart & Co. v. Kirkland

SOMERVILLE, J.— It has been long settled in this State, by a line of decisions which seem to be supported by the weight of authority, that it is a good defense to an action on a bond that a defendant, who is a surety, intrusted the bond to the principal obligor as an escrow, with authority to deliver it only on the express condition that other named persons should join as sureties in its execution prior to such delivery, and that the instrument was delivered to the obligee in violation of this condition.— Guild v. Thomas, 54 Ala. 414, and authorities there cited; Bibb v. Reid, 3 Ala. 88. There are two established modifications of this rule : (1). It does not apply to commercial paper which has come into the hands of a bona fide purchaser before maturity, who is without notice of the condition. — Marks v. [351] First National Bank, 79 Ala. 550; 1 Daniel Neg. Instruments, 3d Ed., §§ 855, 856. (2). It doés not apply where the surety, having knowledge or notice of the delivery of the bond, suffers the principal to act under it to the prejudice of the obligee, so as to waive the condition, and thus estop the surety from insisting on the defense.— Wriqht v. Lang, 66 Ala. 389. The defendant Kirkland’s plea constituted, under this principle, a good defense to the action, if the jury believed the evidence in support of it, apart from the issue raised by the plaintiff’s replication to this plea. 2. The main question arises on the sufficiency of this replication — the same question, being also raised by one of the charges refused by the court — which in substance avers that the defendant signed the instrument upon the false representation of the principal obligor, Crawford, that it was a mere recommendation, and not a bond. A sufficient answer to this is that the plaintiffs have declared upon the paper as a bond, and can recover on it only as such. Their right to recovery is necessarily based upon the theory, that the defendant executed a bond, and not a recommendation. They do not sue upon it as a recommendation, which would either impose no liability, or else one of an entirely different nature, resting on different principles of law. The plaintiffs are, therefore, estopped from averring the fact set up in tbe replication, which is not only a departure from the original cause of action, but repugnant to the averments of the complaint. 3. Perhaps the replication to the plea would be bad upon another ground — that is, in setting up a fact which shows fraud in the execution of the bond. The defendant never made the contract declared on, because its contents were fraudulently misrepresented to him. He was told and believed he was signing one thing, while in truth and fact he was signing another, and entirely different thing, so that, as said in Foster v. McKennon (Law Rep.), 4 Com. PL, 704, “his mind never went with the act.” — Burroughs v. The Pacific Guano Co., present term, in MSS. The case is distinguishable from that of one who has been induced by fraud to sign an instrument the contents of which he knew. Putnam v. Sullivan, 4 Mass. 45 ; s. c. 3 Amer. Dec., 206 ; Schuylkill County v. Copley, 67 Penn. St., 386; s. c. 5 Amer. Rep. 441; Foster v. Johnson, 70 Ala. 249 ; Swift v. Fitzhugh, 9 Por. 39 ; Vance v. Lary, 5 Ala. 370. While in the former case there is a contract voluntarily entered into by fraudulent inducement, in the latter, the paper signed is "not at all the deed or contract of the party signing. There is here [352] no question arising of an innocent holder for value of commercial paper, as in the case of Marks v. First National Bank, supra. There, too, the surety intended to sign the very paper to which he attached his signature, his assent thereto being procured by fraud. But, we leave this point undecided, so as to be open for future consideration when presented. The demurrer to the replication was properly sustained for the first reason above assigned ; the charges are equally free from error, and the judgment is affirmed.