Sharp v. Levan

Opinion by

Mr. Justice Elkin,

This is an action by one holder of shares in the capital stock of a national bank against another shareholder upon an alleged oral promise to pay an assessment and contribute to a voluntary fund required by the comptroller of the currency in order that the bank, which had been compelled to close its doors, might resume business. The occurrences to which the controversy relates took place in 1894. The oral promise proven at the trial was as follows: “You sign that paper and I’ll make your stock good; I will take care of you.” In order to understand what was meant by the parties and what legal obligation, if any, the promisor assumed, it is necessary to briefly refer to the circumstances under which the promise was made. On account of a large defalcation the comptroller of the currency closed the bank and took charge of its business. The stockholders and creditors were desirous of making some arrangement by which the defalcation could be made good, and the bank be permitted to resume business. A committee, appointed for the purpose, waited upon the comptroller of the currency, with a view of having a plan suggested to accomplish the desired result. The comptroller agreed that if the stockholders would make good the impairment of the capital and assets of the bank by paying an assessment of one hundred thousand dollars, and, in addition, make a voluntary contribution of fifty thousand dollars, the bank might reopen its doors and resume business. The stockholders set about to meet these requirements. Meetings were held and plans discussed for raising the funds necessary to meet the conditions imposed. Sharp attended these meetings, but insisted that his financial circumstances were such that he could not pay the assessment on his stock, or contribute his share to the voluntary fund required, and because he could not meet these obligations, he was unwilling to sign the agreement which embodied the plan for the resumption of business by the bank. It was at this stage of the proceedings that Sharp alleges Levan made the promise hereinbefore set out. After this promise was made Sharp signed the agreement — the other stockholders having previously signed it. Sharp owned sixty-two shares of the par value of one hundred dollars each. The assessment on his stock was sixty-two hundred dollars, and his share of the contribution to the voluntary fund, thirty-one hundred dollars. Levan paid the thirty-one hundred dollars, but did not pay the assessment of sixty-two hundred dollars on the stock. About a year later the stock was sold as required by the national bank laws because of refusal to pay the assessment. This suit was brought by Sharp against Levan to recover ninety-three hundred dollars, being the amount of the assessment on Sharp’s stock and his share of the contribution to the voluntary fund. The theory relied on to sustain a recovery is that it was necessary to pay the sum claimed in order to make the stock of Sharp good, and that this is what Levan promised to do. The defense is two-fold, that is to say, if such an oral promise was made, which is denied, it was a promise to pay the debt of another, and, therefore, within the statute of frauds; and, even if not within the statute, no damages were proved as a result of the breach of the promise to. pay. We think it was clearly a promise to pay the debt of another. Sharp owned the shares of stock, and under the national banking laws he was obligated to pay the assessment, and to the extent of sixty-two hundred dollars at least, it was a debt imposed upon him by law. He was not compelled to pay the thirty-one hundred dollars into the voluntary fund, but when he signed the agreement together with the other stockholders, he assumed this obligation, which the bank could enforce against him as a personal liability. It, therefore, became his debt. It seems perfectly clear, therefore, that if Levan assumed these obligations at all, it was a promise to pay the debt of Sharp. It is true that every promise to pay the debt of another is not necessarily within the statute, and that it is sometimes difficult to draw the line between a promise within and one not within the statute. When the leading object of the promisor is to subserve some interest or purpose of his own, notwithstanding the effect is to pay, or discharge the debt of another, his promise is not within the statute: Bailey v. Marshall, 174 Pa. 602. The general rule is otherwise, and the authority just cited, as well as other cases of like purport, may be regarded as exceptions to the rule. In the present case, it should be noted, that the primary purpose of all stockholders was to protect the bank. The interest of Stockholders as individuals was only incidental to this general purpose. The whole plan was to put the bank in position to resume business. Sharp signed the agreement for this purpose, and no doubt did so because he expected to be benefited as a stockholder. What was true of Sharp was equally true of the other stockholders, including Levan. All of the stockholders, under the plan for resumption, were primarily concerned with the affairs of the bank, and were benefited, if at all, only as their holdings of stock might be appreciated in value by the bank resuming business. They acted in concert for a single definite purpose, and it must be assumed that each stockholder expected to be benefited in proportion to the number of shares held by him. Under these circumstances we are inclined to the view that Levan had no such personal interest or purpose of his own to subserve as to bring his promise within the exception to the general rule. However, it is not necessary to rest the decision on this ground, and we do not do so. Even if it be conceded, which it is not, that the promise was binding upon Levan, appellant has failed to make out a case. What was the legal effect of the promise, if made? It was to make good the stock of Sharp, who was unable to meet the demands made upon him as a stockholder in the emergency. To make his stock good it was necessary to pay ninety-three hundred dollars. If he had paid it himself he would have had an investment of ninety-three hundred dollars, in addition to the original cost of his stock. If Levan made good the stock by advancing the ninety-three hundred dollars, Sharp would owe him that amount of money, which he would be under obligation to pay back with interest before his stock would be good in the sense of being free from the assessment and his undertaking to contribute to the voluntary fund. Certainly Levan, under the promise relied on, was not obligated to pay into the bank ninety-three hundred dollars and have no recourse against Sharp, or the stock which stood in his name, for the amount so advanced. When the stock was sold because of the refusal, or failure, of Sharp, or anyone else, to pay the assessment, the purchaser, to all intents and purposes, stood in Sharp’s place, provided, of course, that the sale was made subject to the payment of the assessment and the obligation to pay the share of the voluntary fund which Sharp had agreed to contribute, which we have no doubt must have been understood by all parties concerned at the time of the sale. If Sharp suffered any loss at all it was because the stock at the time of the sale was worth more than it brought plus the assessment and his share of the voluntary fund. In such event Sharp would have an equity, the value of which could only be ascertained from the evidence. But there is not an item of testimony upon which to base a finding that the stock was worth more than it sold for in addition to the charges against it, or to show the value of any equity that Sharp might have had in it. Appellant entirely failed to prove any damages resulting from a breach of the alleged oral promise, and we cannot see any escape from the conclusion that there was a failure to make out a case. This was the view of the trial judge when the nonsuit was entered, and the learned court below emphasized this thought in a well-considered opinion refusing the motion to take off the nonsuit. We are all of opinion that the case was properly disposed of.

Judgment affirmed.