Smith v. Ide , 3 Vt. 290 ( 1830 )

Royce, J.

delivered the opinion of the Court. — Several questions are made in the argument of this case. 1. Whether the un~ dertakmg of the defendant is to be .considered as an original engagement, or as collateral to that of Gilman, and so within the statute of frauds and perjuries. 2. If within the statute, whether the writing discloses a sufficient consideration to sustain the promise. 3. If it does not, whether the promise is ineffectual and void, either at common law or under the statute, because the consideration is not in writing. And lastly, if the promise was binding, whether the defendant is discharged for want of a seasonable demand and notice.

The rules for determining, when an undertaking in relation to the debt or liability of a third person, or from which he derives a benefit, is within the statute, have, by a long succession of judicial determinations, become, for the most part, well- settled and sufficiently intelligible. Of these rules, the one most material to be noticed may be stated in the following terms: — If the entire benefit of a contract enures to A; as if he receives the property which is purchased on credit of B, then any undertaking of C for the payment is within the statute, provided A becomes at all liable to B for the price as a purchaser : but if the credit is given to C exclusively, he in effect becomes the purchaser, and his engagement for the price is not within the statute ; though the purchase is intended for the benefit of A to whom the property is delivered.—6 Mod. 249; 2 T. R. 80; 1 H.Bl. 120; 1 B. and P. 158; 17 Johns. 114. In applying this principle to the present case, we have no occasion to enter into the nice distinctions which have been sometimes taken, as to the party to be regarded as the principal or direct contractor to whom credit was given. Here the purchase of the horses was made solely by Gilman, he became the direct debtor for the price, and his note is still in force against him. Therefore, the uh deeping of the defendant was clearly a collatteral engagement, and directly within the statute.

It has not been pretended that this writing discloses the true consideration on which it was given; which was the subsequent completion of the sale ánd delivery of the horses to 'Gilman., The language used would have been equally applicable to a sale which had been consummated ten days before. And in truth the writing does not import any certain consideration whatever. For any thing there disclosed,, it might have consisted in a premium advanced by Gilman or the plaintiff, in a stipulated benefit to Gil-man, or-in some detriment tobe incurred, or advantage forborne, by the plaintiff; or the defendant might have acted without any inducement which the law would recognize as a consideration. The question then arises, had the plaintiff a right to show the consideration of this written promise by parole evidence ? I am not prepared to admit the position taken by the defendant’s counsel, that at common law a promise reduced to writing must express the consideration on which it is founded. It is supported by a dictum of Best, Ch. J. in Morlay vs. Boothby, 3 Bing. 107, but seems to be opposed by the general current of other authorities. There is no necessity, however, for deciding how the question would be affected by the rules of evidence at common law, since it must now be governed by the operation of the statute. If this requires the consideration to appear in writing, of course, the parole evidence was not legally admitted ; but if it merely requires written evidence of the act or duty to be performed, or, in other words, that the promise merely shall be in writing, it must be understood to validate and legalize the contract, (ifit would be effectual without writing before the statute,) when this single superad-ded requisite is satisfied.

That part of our statute for the prevention of frauds and perjuries, which relates to this question, is in the following words :— “That no suit, in law or equity, shall be brought or maintained, upon any contractor agreement hereafter to be made, whereby “ to charge the defendant upon any special promise to answer for “the debt, default, or miscarriage of another person ; unlessthe “ contract or agreement, upon which such action shall be brought, “ or some memorandum or note thereof, shall be made in writing, “ and signed by the party to be charged therewith, or some other “ person thereunto by him lawfully auth'orzed.” This is nearly a transcript of the corresponding clause in the 29 Ch. II. c. 3, sec. 3. The only difference which can^itall affect the senseis, that in the English statute the word “ coftract” is not inserted, and the word “ agreement” occurs but once, and stands in the place of the words “ contract or agreement,” where these are repeated in our act.

It was decided in England for the first time, that the consideration of the promise, as well as the promise itself, must be in writing, by the court of King’s Bench in Wain vs. Walters, 5 East, 10. This decision was regarded as an innovation by the profession in that country, as appears by the following remarks of Eldon, Ld. Ch. in ex parte Gorden, 15 Ves. Jr. 286. “ The first objection, viz — that which Wain vs. Walters was cited to support, is of great importance. Until that case was decided, some time ago, I had always taken the law to be clear, that if a man agreed in writing to pay the debt of another, it was notnecessary that the consideration should appear on the face of the writing.” The doctrine of that case has occasioned much discussion both in England and this country, and has at last become fully established in the different English courts. It has been admitted in some of the United States, and iejected in others. Our statute is comparatively recent, and I am not aware that this question has ever before arisen under it.

In Leonard vs. Vredenburgh, 8 Johns. 23, Kent, Ch. J. proceeds to class the different cases connected with this enquiry. The first class consists of those cases in which the guarantee or promise is collateral to the principal contract, but is made at the same time, and becomes an essential ground of the credit given to the principal or direct debtor. The second is where the collateral undertaking is subesquent to the creation ofthe debt, and was not the inducement to it, though the subsisting liability is the ground of the promise, without any distinct and unconnected inducement. The third is when the promise to pay the debt of another, arises out of some new and original consideration of benefit or harm, moving between the newly contracting parties. The two first classes he treats as obviously within the statute, and the other not. It is evident that the present question has no concern with the last description of cases here given. And as to the others, there is this distinction, that in those falling within the second class, some new or additional consideration is necessany to give effect to the collateral engagement; while in those belonging to the first, no consideration is required to exist distinct from that which is contained in the principal contract, and which passes between the direct contracting parties. The auxiliary promise, as it forms a constituenr^Eft-t of the entire contract at the time, is supposed to participate in its consideration.—14 Ves. Jr. 190;

8 Johns. 23; 11 Johns. 221; 9 East, 338; 7 C. L. Rep. 414. It is on this principle that guarantees are usually enforced, as there is generally no consideration distinctly applicable to those engagements. If, however, an undertaking in the nature of a guarantee appears to be subsequent to the principal contract, having formed no part of the ground for the credit thereby given, it will belong to the second class of cases, and require a supervenient inducement or consideration to support it—4 Pick. 385; 2 Saund. 211; 7 T. R. 350, n.

The present case is manifestly within the first class according to this- distinction. The promise of the defendant took effect simultaneously with that of Gilman it was an essential ground ci the credit which Gilnian received, and without it that credit would not have been given. It had not, nor did it require, any consideration passing between the plaintiff and defendant ; but was sustained by its union with the principal or direct contract of purchase. Hence a question arises, whether the doctrine in Wain vs. Warlters, which was a case falling within the second class, cx-rends beyond those collateral undertakings for which a distinct consideration is required. This point was discussed by the Supreme Court of New York in Leonard vs. Vredenburgh, above cited, and again in Bailey and Bogert vs. Freeman, 11 Johns. 221; and it was determined, that those facts which went to show that no actual consideration for the collateral promise was required to exist, by reason of its original connection with the principal contract, need not appear upon the written engagement; but that, consistently with the decision in Wain vs. Warlters, they might be proved by parol evidence. Kent, Ch. J. in the first case expresses himself in these words : " To say that the promise is void, for want of disclosing a consideration, is assuming what the plaintiff offered to show ought not to be assumed, for that there was no distinct consideration passing between the plaintiff and defendant. Johnson's note given for value received, and, of course, importing a consideration on its face, was all the consideration requisite to show. The paper disclosed that the defendant guarantied this debt of Johnson ; and if it was all one transaction, the valt~e received was evideiice of a consideration embracing both the promises." Platt, J. says, in the last case,-" I think there is a sufficient "note or memorandum" of the whole agreement, including the consideration, stated in the written agreement to which the guarantee refers; but if no c~sideratiou had been expressed in the written agreement, it might be shown by parole, because it is only necessary here to prove a consideration for the principal agreement." There can be no doubt of the correctness of these decisions ; and indeed the doctrine which they establish must have been always acted on to some extent, though perhaps without often giving rise to this inquiry as a distinct question. Every undertaking given by a stranger to a note or other contract to insure its payment or performance, whether by a writing on the back, or memorandum at the foot of it, or by a separate instrument, if the note or contract continues obligatory upon the proper parties to it, is a promise for the debt of another within the stat-ate, Now it usually happens that these collateral engagements, are extremely brief, often without date,and almost invariably without the mention of any consideration. Yet, without any separate consideration, such of them as take effect at the same time with the main contract,and operate as inducements to it,are nevertheless binding, when the facts showing this relation sufficiently appear. In many instances the writing may furnish either express proof, or a reasonable presumption, of all that is necessary in this respect ; but in others, resort must be had, in a greater or less degree., to parole evidence.

It follows from the view of this case which has already been taken, that the decision of the county court, in admitting the evidence objected to, was most undoubtedly correct; and there is no necessity, in order to affirm their judgement, that we should enter upon a more direct investigation of the doctrine advanced in Wain vs. Warlters. But as the question is of general interest, and is fairly before the Court upon this record, it will be briefly considered.

The decision in Wain vs. Warlters is rested chiefly upon a distinction taken between an agreement and an undertaking or promise. And it seems to be admitted, at least by implication, that if only the latter expressions had been used in the statute, the consideration for such 'undertaking or promise would not be required to appear in writing. One of the judges goes even farther than this, and says that if the statute had required, that the “promise or agreement” on which the action is brought should be in writing, he should have thought the statute was satisfied by putting the promise into writing without the consideration. Ld. Ellenborough, by whom the leading opinion in the case was pronounced, considers the “ special promise,” upon which the defendant is charged, to be but a part of the “ agreement,” on which the action is brought, and proceeds to ascertain the legal import of the word agreement. This he makes to consist in the meeting or assent, upon a consideration, of two or more minds, which must be so certain and complete as to be mutually binding, so that each party may have his remedy upon it. Hence the conclusion is drawn, that as the agreement is to be in writing, it must, of course, when reduced to writing, exhibit those mutual considerations which are essential to constitute it an agreement.

That this was the principal ground of the decision, appears also by the refusal of the same court, to extend the doctrine to those sections of the act in which the word agreement does not occur. Thus in a case arising soon after under the 17th section, in which it is required that the “ bargain,” or a note or memorandum thereof, shall he in writing,the paper offered in evidence was adjudged not to express a sufficient consideration,and for that cause was rejected at Nisi Prius on the authority of Wain vs. Warlters, and the plaintifi became nonsuited. But the nonsuit was set aside by the full court, who determined that under that section, it was not required that the writing should disclose a consideration ; and the two cases were distinguished, on account of the peculiar efficacy of the word agreement.—6 East, 307.

It is not my purpose to discuss the etymology of this word, or to question the technical meaning which is here affixed to it. It will be admitted by all that it has likewise a more loose and popular meaning, synonymous with promise, or undertaking, and the question is, in which sense it was used by the legislature.

If by the term agreement, in this instance, was intended all that is claimed for it, it assumes a signification more extensive than a promise, and is nothing less than a mutual stipulation, which may contain any number of acts to be performed on each side. And this, to be binding upon both parties, must be signed by both ; for the party who does not sign it cannot be “ charged therewith.” But the policy of the act is evidently limited to a single object, which is to prevent fraud and perjury in proving the promise of one man to pay the debt of another, So far the reasons for such a law are strong and obvious, but they extend no farther. And if we admit, that the other party might become bound to the terms of the agreement by accepting it, and acting upon it, without signing,yetthe evidence of his obligation to perform it would notap-pear upon the instrument, and, of course, the whole consideration for the defendant’s promise would not be in writing. This difficulty has led Mr. Roberts to observe, in his treatise on the statute of frauds, page 118, (note,) that the doctrine held in Wain vs. Warlters would render it necessary, in most cases, that both parties should sign the agreement; a doctrine, he remarks, “rising greatly above the level of antecedent opinions and authorities.” It may be further remarked, that there are cases clearly sanctioned by the statute, which come short of this notion of a technical agreement. Such would be the case, where a promise to pay the debt of another is given upon a consideration which is not executory. Here is no mutual obligation, but a mere promise, which binds no one but the promissor; and the recital of the consideration does not at all afiect the character of the contract. There is therj .strong gr.ouud to behove, that the word agreement was not used in this fixed and technical sense, but was introduced as a mere change of expression descriptive of a promise in all its varieties of form. And the phraseology employed in this clause of the act, in our opinion, fully justifies this construction; for though the action is brought on the agreement, its only effect is to enforce the promise ; the defendant is charged for the same thing, and to the same extent, by the promise, and by the agreement; therefore, these two words must be understood as synonymous.

Upham, for plaintiff. Smith and Peck, for defendant.

This is the result at which the courts in Massachusetts and Connecticut have also arived, after the most elaborate., investigation. 5 Mass. 358; 7 Ib. 233; 17 Ib. 122; 1 Sw. Dig. 237; 6 Con. Rep. 81.

Having come to the conclusion, that the statute only requires the promise to be in writing, it is scarcely necessary to add, that this requisite does not, in the ordinary sense of it, extend to the consideration. A promise and its consideration are so far distinct, that the terms by which the promise is expressed do not, of course, embrace the consideration.

Fraud and perjury are much more to be apprehended in parole proof of the promise, than in that of the consideration. The subject of the testimony in one case is but language, which may frequently be misconstrued or falsely stated, without affording to the injured party a possibility of redress ; while in the other, it is generally something capable of being seen and traced. That there is some danger, in permitting even the consideration to be thus proved is true, but still the requirement of a written promise furnishes to the party a reasonable protection, and fully equal to that which is provided in the other parts of the act.

The last point made in this case depends on the question, whether the undertaking of the defendant was absolute or conditional. And we think it was an absolute engagement that Gil-man should pay for the horses at the expiration of sixty days, or that the defendant would himself make the payment. Thisisthe obvious import of the language used, and such is the character which has been given to other like engagements by numerous adjudications. Therefore, on failure of payment at the time it fell due, the defendant became fixed with this debt, without reference to any demand on Gilman or notice to himself.—12 Mass. 14; 14 Johns. 349; 20 Ib. 365; 6 Con. Rep. 315.

Judgement of the county court affirmed.