Remington Sewing Machine Co. v. Kezertee

Lyoh, J. The law is, that if a person who contemplates becoming surety to another for the payment of money or the performance of any act by a third person, applies to the creditor or person to whom the security is to be given, for information as to the nature, extent and risk of the obligation, or the circumstances, condition or character of such third person, the creditor, if he undertakes to give the information, is bound to disclose every material fact within his knowledge affecting the proposed liability. If the creditor conceal any fact unknown to the proposed surety, which, had he known it, would have deterred him from becoming surety (the latter not having the present means of ascertaining the fact, or, having such means, if artifice be used to mislead him or throw him off his guard), it is a fraud upon him, and relieves him from his obligation. Especially is this so where the obligation of suretyship is entered into at the request of the person to whom the security is given. In such a case perfect good faith is required of him who is to be benefited by the transaction, if he assumes to give the information; and if that obligation is not observed by him (the surety not having other present means of information), the creditor cannot successfully invoke the protection of the maxim caveat emptor to shield him from the consequences of his fraud. If authority is required for a proposition so obviously reasonable and just, the cases which support it (some of them in this court) will be found cited in the briefs of the respective counsel for the defendants. The person to whom the security is proposed to be given may refuse to give any information, and, if he so refuses, the maxim caveat cmptor applies. The surety then incurs the liability at his own risk. The charge of the learned circuit judge does not, in express terms, contain this qualification; but on the facts of the case the omission is immaterial, for the reason that the uncontradicted evidence shows that the defendants went to the office of Barr & Konrad [415] for the express purpose of obtaining information from the agent of the company of their financial condition, and under the charge the j ury must have found that the agent assumed to give them such information. In all other respects the charge seems to be in strict accord with the principles above stated, as also are the refusals to give certain instructions proposed on behalf of the plaintiff. It was claimed in argument that the testimony tended to show that the books of Barr & Konrad showed that they had indorsed or guarantied the notes of the company theretofore taken by them for machines, and hence that the defendants had the present means of knowing the fact. That question was submitted to the jury, and there is sufficient evidence to warrant a finding that the books did not show such liability. The defendants both testified that had they known of that liability they would not have signed the guaranty. This was competent testimony to go to the jury. Assuming the defendants to be men of ordinary caution and prudence, it is easy to believe that they testified truly. Upon the whole case we are impelled to the conclusion that the judgment should not be disturbed. By the Oourt.— Judgment affirmed.