Richmond v. Standclift

The opinion of the court was delivered by Williams, Ch. J. The question in this case is, whether the facts, proved at the trial, constitute any defence against the note for either, or both of the defendants. Conceding to the defendants the principles which regulate contracts between a creditor and the surety of his debtor, we think the decision of the county court was correct, and the facts proved did, in no way, operate to discharge the surety. [261] Á contract, which is a fraud on third persons, may, on that account, be void as between the parties. On that principle the decision was made in the case of Jackson v. Duchaire, 3 Term R. 551, relied on in the agument; and on the same principle the decisions have been uniform that, if a creditor makes a composition with his debtor to receive a less sum than is due, and the friend of the debtor is induced to be surety for the sum agreed to be received, any secret agreement between the creditor and the debtor, that the latter shall pay any further sum, or any promissory note, or other security given for that purpose, is void between the parties, as a fraud upon that friend. The cases under this head are numerous. The case at bar is not of that character. Here was no valid or legal agreement between the parties different from the one which appeared on the note. It is also a principle of law that the concealment from the surety of any of the material terms of the contract, which increases the risk he is under, or varies or increases his responsibility, avoids the engagement of the surety. The case of Pidcock v. Bishop, 3 Barn. & Cres. 605, was decided on this principle. In that case the object of the guarantor was that Tickell should have iron at the market price, to enable him to set up business, out of the avails of which, it was expected he would pay for the iron, and thus liberate his guarantor ; whereas, by the secret agreement made by him, he was not to have the iron at the market price, but was to pay ten shilling extra per ton, on old debt, contracted before he became a bankrupt and which was probably proved and discharged under the commission. This agreement was a direct fraud on the surety, increased his risk and responsibility, and abstracted the fund, or a part of it, which should have been applied in discharge of his liability. The surety was therefore not liable on his engagement. But the case at bar is not of that character. The agreement to pay the extra three per cent, was not a valid or legal agreement, neither increased the risk or responsibility of the surety, nor abstracted any of the funds furnished by the creditor to the principal, was void as against the provisions of the statute, and was never attempted to be enforced or performed, but was at most, what would be considered, by some, as an honorary undertaking, and nothing more than a [262] gratuitous promise, not binding, in law, or in foro consci- .. entice. Our present statute does not make a usurious contract r void, any further than for the sum received, or agreed to be received, above the legal interest. There was no evidence, in this case, which, on any principle, should prevent the plaintiff from recovering of the defendants the amount of the note. The judgment of the county court is therefore affirmed.