Townsend v. Long

Mr. Justice Mercur

delivered the opinion of the court

The last assignment having been withdrawn, the other assignments will be considered together. They all relate to a verbal promise to pay the debt of another. The first section of the Act of 26th of April 1855, declares no action shall be brought to charge the defendant upon any special promise to answer for the debt or default of another, “ unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or by some other person by him authorized.”

The general rule is well settled that the promise is within the statute where it is collateral to a continued liability of the original debtor.

It is true, it was said, in Leonard v. Vredenberg, 8 Johns. 39, in regard to a similar statute, 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 case is not within the statute.

The cases of Malone et al. v. Keener, 8 Wright 107 ; Stoudt v. Hine, 9 Wright 30; Arnold v. Stedman, Idem 186, and Whitcomb et al. v. Kephart et al., 14 Wright 85, have been cited in support of this view. In Malone v. Keener, the case of Leonard v. Vredenberg is cited with apparent approval; but the facts were sufficient to take the case out of the statute, without adopting that rule of construction. The plaintiffs in error were contractors in the building of a railroad. They had sublet a portion of the work to the defendant in error. On settlement with this sub-contractor, and in part payment of the sum which they owed him, they delivered to him a note under seal, against the corporation from which they had taken the entire contract, and guaranteed its payment. It will be observed that they alone were indebted to him for his work and labor. That work and labor had been performed under a contract between him and them only. The debt which they thus sought to discharge was their own debt. In so doing they turned out the note, the payment of which they guaranteed. In no just sense can it be said that the design of this transaction was to answer for the debt or default of another. It was settling their own debt by the transfer of a chose in action, the apparent value of which they guaranteed to be its true value. This was based upon a full and sole consideration received by themselves. The promise did not come within the statute. It was good without any writing. The promise being in effect to pay their own debt, although in so doing they incidentally guaranteed the debt of another, did not change its character: Uhler v. Farmers’ National Bank, 14 P. F. Smith 406.

In Stoudt v. Hine, the plaintiff had money in his hands, which unquestionably belonged to one Kallahan. The latter agreed with Hine that a specific sum should be paid to him by Stoudt, out of the money in his hands, and Stoudt agreed with Kallahan to pay it to Hine. Hence the court in sustaining the promise adopted the language of Mr. Brown, in his work on the Statute of Frauds, where he says, “it is obvious that an engagement in terms to apply the debtor’s own funds received or to be received by the defendant, to the payment of the demand against him, creates a duty as agent, rather than a surety : the defendant’s promise is not to pay the debt, but merely to deliver certain property to the nominee of the original debtor, and the right of action of such nominee against the defendant for a breach of his promise, is not at all affected by the Statute of Frauds.”

In Arnold v. Stedman, the defendant had filed a mechanics’ lien on the equitable interest of Barrett in the land. Arnold then brought ejectment on his legal title, and obtained a verdict under an arrangement which gave it the effect of a conditional verdict. While this suit was in progress, Arnold and Stedman agreed that the latter should make no further costs on his lien, and that Arnold would pay Stedman his demand when the property came back to him. Stedmaii made no further costs. The property came back to Arnold. This agreement was held valid, for the reason that he thereby acquired the land, which at the time of the agreement, was charged with the debt due to Stedman. His promise was in relief of property to which he held the legal title, and to facilitate his recovery*of the land. This took the case out of the statute : Landis v. Royer, 9 P. F. Smith 95.

In Whitcomb et al. v. Kephart et al., the controlling facts were these: One Goss had a contract with Langdon and Diven to cut saw-logs for them on their lands at a price specified. Afterwards Goss gave a sub-contract to the Kepharts by which they agreed to cut a part of these logs. The Whitcombs were agents for Langdon and Diven, and were furnished with money to pay Goss as the work progressed. Some complaint having been made by the Kepharts in regard to obtaining their payment, they and Goss and Whitcomb met face to face, and a new agreement was then and there made between the three parties. It was agreed that the Whitcombs should pay the Kepharts for their work, except so far as Goss himself might pay them; and that Whitcombs should reserve the sum thus paid by them out of the amount going to Goss under his contract with Langdon and Diven. The Kepharts went on with the work. The Whitcombs received the money from Langdon and Diven, wherewith to pay them, but did not do so. It had become their own debt under a contract in which Goss participated and agreed that they should receive the money for the use of the Kepharts. The promise then which the Whitcombs made was not to pay the debt of another, but to discharge their own original agreement; an agreement by which the money they might receive was appropriated to this specific object. A fund was then provided by Goss to pay the very debt which the Whit-combs agreed to pay. These facts then did not bring the case within the statute: Clymer v. De Young, 4 P. F. Smith 118.

The apparent favor with which Leonard v. Vredenberg had been cited in some of the preceding cases, was clearly and distinctly repudiated in Maule v. Buckwell et al., 14 Wright 39. It was there said that, “ It is not true as a general rule that a promise to pay the debt of another, is not within the statute if it rests upon a new consideration passing from the promissee to the promissor. A new consideration for a new promise is indispensable without the statute, and if a new consideration is all that is needed to give validity to a promise to pay the debt of another, the statute amounts to nothing. Nor can it make any difference that the new ■consideration moves from the promissee to the promissor.” In further disproval of the rule recognised in Leonard v. Vredenberg, Mr. Justice Strong said, “ That this proposition is inaccurate, however, is almost universally admitted, and as we have already remarked, it practically denies all effect to the statute. It cannot be admitted for a moment in the terms in which it was expressed.” This case proceeds to show by the authorities, that the consideration for the promise is of importance only where it is either a substantial transfer of the creditor’s claim to the promissor, making •the transaction a purchase, or where it is a transfer to the promissor of a fund pledged, set apart, or held, fo^ the payment of the debt. It is only in such cases, or in those of a kindred character, if the old debt remains, that the promissor is liable, unless, by an agreement with the original debtor, the latter has become only secondarily liable.

This doctrine is in accord with the language of Chief Justice Lowrie, in Shoemaker v. King, 4 Wright 107. He said, “ While the old debt remains the new contract cannot be substituted, but is only a collateral one, a promise to pay another debt, and it is forbidden by the statute as a cause of action.” He, however, disclaimed any intention to question those cases in which a debtor had put money or other means into the hands of another to be delivered to a particular creditor of his, and the creditor had been held entitled to recover of the promissor. The judgment of the court was, that Shoemaker was not liable to a creditor of Harper & Reese, although, on his purchase of their entire partnership effects, he had verbally promised to pay all the debts of the firm. The evidence does not show' any promise to pay the debts with those effects, nor from their proceeds. So in Maulé v. Buckwell, supra, it was held that a verbal promise to pay all the debts of a private corporation made to certain directors of the company, on a sale and transfer to him of part of their stock, was within the statute, and the promissor was not liable to a creditor. Here too was no agreement'to pay with the stock purchased or its proceeds.

In Clymer v. De Young, supra, on a sale of a stock of goods, the purchaser promised to pay a certain debt due by the vendor, and the promise was held not to be within the statute. The facts, however, show that this promise was not made to the vendor only, but was in an agreement between the creditor, purchaser and vendor. It was a contract made by all three of the parties. The promissor thereby became the principal debtor, and it was this debt of his own which he promised to discharge.

It is true, the opinion proceeds to liken the case to Stoudt v. Hine, when the facts were radically different. In the one, there was a promise to the person whose money he held, to pay over'that money to a creditor, the creditor not being a party to the new agreement. In the other, there was an express agreement between the original debtor, the creditor, and the new promissor, so that it became a new contract between all the parties in interest, and the promissor was clearly liable to the creditor.

Where there is a transfer of a fund to the promissor, for the payment of the debt, as in Stoudt v. Hine, he is liable to the creditor on his verbal promise made to the owner of the fund; or if property charged with the payment of the debt be transferred to him, on his promise to the vendor to pay the debt, he is liable to an action by the creditor, as in Arnold v. Stedman, supra. In Torrens v. Campbell, 24 P. F. Smith 470, the agreement to pay ■the debts was in writing, so the question of the statute did not arise..

As a general rule, the true question is not what is the consideration, but what is the promise ? If, however, one assumes to pay the debt of another, in consideration of funds being placed in his hands for that purpose by the original debtor, then the consideration becomes an important fact in fixing the liability of the promissor to the creditor.

The general rule is that if the promise be to pay or discharge either absolutely or conditionally the debt of another then due, or thereafter to become due, on an existing contract, it is within the Statute of Frauds. Before a creditor can recover, then, upon a verbal promise to pay him the debt of another, he must bring himself within one of the class of excepted cases.

The finding of the jury in this case establishes substantially these facts: Long, Vance and Rankin were associated as copartners in the furniture and undertaking business, on a limited scale. In January 1870, Long sold to his co-partners his interest in the establishment, which included tools, hearse, ready-made furniture, accounts due them, and the use of the shop without rent until the 1st of May following. In consideration of which they were to pay him $700 without interest, $100 thereof on said 1st of May and the remainder at the expiration of eighteen months from the time of purchase; and also to pay all debts contracted while they w'ere associating together. At the expiration of two months Rankin retired, leaving the property and business in the hands of Vance, with the understanding that the latter should pay all their debts. Vance continued the business for a short time, but in the same spring, and before making any payment to Long, sold out the entire establishment, including all debts due to it, to the plaintiff in error, in consideration of his verbal promise to pay all the debts of the concern, the debt in favor of the defendant in error being expressly mentioned as one of them. The actual value of the property thus sold and purchased is not clearly shown. It does not appear that any particular point was made in regard to it. In the absence of proof showing it, we will not assume its value to have been less than the amount Townsend agreed to pay. It was then a purchase, and taking possession by him, of the same property substantially that the defendant in error had delivered to Vance. It was practically an agreement to take and occupy the same position which Vance had held in the transaction. As Vance had taken and held the property under an agreement to pay Long, in like manner, on its transfer to Townsend, the latter was to take and hold it. While this did not create such a trust in the latter as could have been specifically enforced by bill in equity, yet it so far partook of the character of one as to transfer the superior obligation to him. Hence we conclude the fair inference to be, and it is not removed by any evidence, that the property was transferred to the plaintiff in error with the understanding of the parties to the transaction that the avails and proceeds of the property and business should pay and discharge the debt due to the defendant in error. It is true, this view of the case was not clearly presented in the points submitted to the court below, nor in the answers of the learned judge, but as it naturally arises from the facts in the case, we see no sufficient error to reverse the judgment.

' Judgment affirmed.