I think there was no error in the part of the charge excepted to, prejudicial to the defendant, or in the refusal to charge as requested.
The evidence showed that the defendant signed the guaranty at the time Carlile signed the bond, and that they were then delivered to or left with Mr. Townsend, with the defendant's knowledge and assent, without any communication between Townsend and defendant. It also appeared that the understanding between Carlile and the defendant was that the former was to borrow of Townsend $1,500; and that such was the transaction which, according to the understanding between them, the defendant was to guarantee as the surety of Carlile. If this understanding between Carlile and his surety was communicated to Townsend before he received the bond and guaranty, and he, notwithstanding such knowledge, advanced, not the money, but the assignment of the bond and mortgage and the note of Carlile, he ought not to hold the defendant responsible, because the engagement was diverted from the purpose for which it was given, with the knowledge of the party receiving it, which would be a violation of good faith. Carlile testified, in effect, that the negotiation with Townsend commenced by an understanding that a loan of money was to be made, and that Townsend knew that it was for that purpose that the defendant signed the guaranty. Townsend, as a witness, denied that he ever agreed to loan the money or ever entertained that proposition, and, substantially, that he had no knowledge or suspicion that there was any diversion of the defendant's undertaking *Page 302 from the purpose for which it was intended. The part of the charge to which exception was taken affirmed that if the account thus given by Townsend was true, the plaintiff was entitled to recover the value of the Little mortgage; and if it was not worth as much as it was sold to Carlile for, then as much as the latter received upon the sale and assignment of it to Strong; but that he was in no event entitled to recover the amount of the note which Townsend had held against Carlile, and which he then surrendered, because it was worthless on account of Carlile's insolvency. As the plaintiff has not appealed, it is of no importance to examine the ground upon which a recovery was denied for that part of the bond which represented the amount of the note, or why the recovery should have been limited in any event to the amount for which Carlile disposed of the bond and mortgage. Surely a person, though he may be insolvent, has a right to pay or secure a debt which he owes, and procure a friend to become security for it, if he will consent; and in the absence of fraud or imposition, a man may lawfully sell and another may buy a moneyed security for the amount due upon it, and secure the consideration of the purchase in any way in which he may secure any other purchase. But the rulings against the plaintiff are, as I have said, immaterial upon this appeal; and as to the deduction to be made upon the mortgage in one contingency, for the further reason that the jury have found that the mortgage was worth all that the defendant sold it for.
The position, that if one sign a note, bond or guaranty running in terms to another person by name, as the creditor, and intrust it to a third person, to negotiate for his own purposes with the person so named as creditor, and the person so intrusted does deliver it to the party named as the creditor, upon a lawful consideration as between those parties, the creditor so receiving is bound to inquire further as to the understanding or agreement between the surety and the person for whom he became surety, at the peril of losing his security if it turns out that the party intrusted has violated the promise of his surety, cannot be sustained. It would destroy all confidence in such transactions, and enable dishonest *Page 303 men to commit all manner of frauds. The authorities cited in Van Duzer v. Howe (21 N.Y., 531), and the principle of that case itself, show that one who enables another to commit a fraud of this kind is the party to suffer, and not the innocent person who has taken the surety at his word; and are quite sufficient for the decision of this case.
The judgment must be affirmed.
All the judges concurring,
Judgment affirmed. *Page 304