Farmers & Mechanics' Bank v. Hathaway

Barrett, J. The defendant signed the note in question as surety of Osgood, the principal, payable to the plaintiff Bank, and not negotiable — in the common form of a note designed for discount in ordinary course of obtaining a loan from the Bank. He did it under an agreement with Osgood, that lie-, Osgood, was to get the money on it, and pay over $125. to the defendant on a debt which Osgood was owing him, and retain the balance. Osgood went to the Bank with the note, but the Bank declined to discount it. Whereupon, on leaving the Bank, he met Adams, and then informed him of ,his having the note, and his inability to get it discounted, saying to him that his purpose was to get the money on the note,' and apply it to the payment of a note in the Bank of Burlington, on which Adams was surety for Osgood. Thereupon, after Adams had ascertained that the Bank would discount the note if he would endorse it, Osgood let Adams have the note-, under an arrangement that Adams was to apply the money obtained upon it, upon a debt that Osgood was owing him ; and Adams endorsed the note, 'and got it discounted, and received the money upon it of the Bank, and applied it on his debt against Osgood. When it became due, it was protested as against him, and he paid it, and took it up, and then brought this suit in the name of the Bank .to collect the [544] amount of it of the defendant. Adams was not informed, and did not know of the agreement between Osgood and .the defendant, under which the defendant signed and permitted Osgood to take the note, but took the note in good faith. On these facts the defendant claims that this suit cannot be maintained against him. In Pass. Bank v. Goss, 31 Vt. 316, and Dixon v. Dixon, ib. 450, the notes were each received of the principal maker by the party named as payee, upon adequate consideration, and in pursuance of the purpose, in fact, designed in the making of said notes, as well as imported by their face. In these cases it was held that any understanding or agreement between the makers, as to the procurement of other signers as sureties, before the notes were to be delivered, of which the. payee had no notice or knowledge, could not effect the right of the payee, receiving and holding them in good faith to enforce the notes according to their tenor and effect. In the case of the Bank of Burlington v. Beach, 1 Aik, 62, and in the cases succeeding in the same line, down to the Bank of Middlebury v. Bingham,, 33 Vt. 621, and the Bank of Newbury v. Webster not yet published, the parties who had received them (though not the payees named in the notes,) in such manner as to accomplish the purposes for which the notes were made, and without prejudice to the sureties thereon, were held entitled to maintain suits on said notes in the name of the payees with their assent, and enforce the collection of the makers. If this suit is to be maintained, it must be because it falls within the principle of the one or the other of said two classes of decisions. The note not being payable to Adams, distinguishes this case case -from the case of Pass. Bank v. Goss, and of Dixon v. Dixon. Though it was a perfected instrument, it did not import that it was primarily designed to be delivered to him, ¡and thus carry with it the apparent right to receive it, irrespective of any unknown agreement between the makers. The inference from the note itself is, that it was designed by the makers for procuring a loan of the Bank by an ordinary discount. It is not necessary to say whether, if Adams had re [545] ceived the note upon an advance of its amount to Osgood, in the same way the Bank would have done if it had discounted it, he would have had the same immunity against the agreement under which the defendant signed and entrusted the note with Osgood as the Bank would have had if it had discounted and received it. What seems to us to distinguish this case from the second class of cases before named is, that Adams, in fact advanced nothing upon the note. He did not take it in due course of negotiation from a holder of the note, but from the principal maker. He took it in fact as, and in place of, the payee, And he took and appropriated it for a purpose different from that imported by the face of the note itself. The transaction amounted simply to this : Adams, finding Osgood with this note, designed for procuring a loan of money, proposed to take it and apply it on a debt which he then had against Osgood, and it was so done. It seems very clear that such a transaction is very different from any of those in the cases before referred to, and lacks entirely the indispensable elements upon which the right to maintain the suit in those cases depended, and was put in the decisions. It is impossible for us to see upon what principle, either of law or equity, Adams can be held to have immunity by virtue of receiving that note in that manner, against the real transaction and agreement between the defendant and Osgood in and in pursuance of which the defendant signed the note as surety. Certainly no principle of commercial or mercantile law can be invoked for such a'purpose, for the transaction did not place Adams in the character and position, under that law, which would protect him against equitable defences by the surety. He was not payee, nor endorser, nor was he holder for a consideration advanced in good faith at the time he took the note, nor, in our apprehension, should he be regarded as holder unaffected with notice, — for, as before said, the note imported that it was designed to be used for obtaining a loan of money. When, therefore, he took it of the principal maker to apply on an old debt, we think he should be regarded as assuming the peril of the perversion of the note from the purpose of it, as shown by the instrument itself. There is no ground for asserting any equity in his favor, for [546] he made no advance on the note. To he sure he put his name on the back of it and got the money on it of the bank. When it fell due he took it up by returning the money; and he now holds it in just the same character, and with just the same rights, and nothing more, than if he had put the note in his pocket when he received it of Osgood and had kept it there without passing it into the hands of the bank. That this is so, is implied in the bringing of this'suit; for in no other view can the suit be maintained in the name of the bank. If he is not to be regarded as the holder and endorser of the note, but merely a surety upon it by reason of his putting his name on the back of it, then of course, his payment of it to the bank would satisfy any right of action in the name of the bank, either in its own behalf or for the benefit of any body else ; and the only mode by which Adams, as surety, could enforce any right against the defendant as co-surety would be by action for money paid in his own name, to compel a rateable contribution. Now we hardly think it would be seriously claimed, if Adams had kept the note without having endorsed and got it discounted at the bank, that merely by the fact of having received it in the manner he did, to apply on his debt against Osgood, that any equity accrued in his favor against the defendant as Osgood’s surety. But when, in addition, the fact is considered that Osgood was owing the defendant and the defendant signed as surety for the purpose and under the agreement with Osgood, that money was to be raised on the note, of which defendant was to have $125 to apply on his debt against Osgood, the preponderating counter equity in favor of the defendant is very apparent and could not be made plainer by further remarks. Indeed we think the case falls within the principle of Pidcock v. Bishop, 10 E. C. L. 194, which has been referred to and considered with approbation in the various cases that have come before this court involving this subject, and stand in close analogy for the application of principles with the Bank of. St. Albans v. Smith, 30 Vt. 148. As to the deposition of Hodgkinson. It was not taken in the mode prescribed by the statute. Evidence of witnesses may be given in two ways, by producing the witness upon the stand, and [547] in the cases provided by statute, by deposition taken in the manlier prescribed by the statute. We know of no other modes in cases falling within the provisions of the statute, by virtue of any law in force in this State. If the parties agree to testimony being given in some other mode, that stands upon the agreement and not upon the law providing a mode. In this case the evidence was taken under and by force of the order named in the exceptions, and its admissibility was put entirely on the ground that this mode of taking it was a legal mode, — not on the ground that it was taken by the consent of the parties. The plaintiff put himself on the ground that in virtue of this mode of taking it being lawful, he had the legal right to use it, and it was on this ground that it was admitted. We think there is no warrant of law for taking depositions in this way in this case. The judgment is reversed and the case remanded.