137 A. 910 | Pa. | 1927
Argued April 18, 1927. The Pennsylvania Knitting Mills Company was engaged in the manufacture of sweaters and other goods in the City of Philadelphia. Its credit had become depreciated, and raw materials necessary to carry on its operations could be secured with difficulty only. To obtain additional capital a plan was devised of forming a Delaware corporation which should take over the capital stock of the first named, and, as a holder thereof, issue its own securities. The directors of the two companies were practically the same, and the present plaintiff, Bayard, acted in this capacity in both. The Delaware corporation was organized on February 15, 1922, and on that day its directors passed a resolution agreeing to exchange its stock for that of the Pennsylvania company, though the actual transfer was not made until some weeks later. To this minute there was added *82 the following clause: "Further resolved that should it become necessary during the period of the selling of the first preferred stock of this corporation, that any of its officers or directors endorse any notes or guarantee any purchases or assume any other obligations for the benefit of either this corporation or of the Pennsylvania Knitting Mills, said officers or directors are to be indemnified by this corporation against any loss arising therefrom." This corporate action was taken before the Delaware company had acquired the shares in the Pennsylvania company, and was not ratified subsequently by the stockholders of the former.
Yarn had been furnished in the past by Lees Sons to the concern operating in Philadelphia, but further supplies were refused unless additional credits were established. Bayard, the plaintiff, was urged, prior to the forming of the new corporation, to lend aid by guaranteeing payment of balances which might become due by the old company. When the Delaware organization was accomplished, and the resolution above referred to passed, he agreed to assist, and three days later became guarantor of the bills for yarn to be purchased from Lees Sons by the Pennsylvania corporation to the amount of $30,000. Material, though billed in the name of Bayard, was furnished to the latter, which became the primary debtor. He was later compelled to assume indebtedness for goods sold to the amount of $11,090.84, of which a part has been satisfied by cash payment, and he remains liable for the balance.
This action was brought by him against the Delaware corporation, defendant, to recover on the promise to reimburse for obligations assumed, a liability which he insists was implied from the resolution of February 15, 1922. No averment was made in the statement of claim of the existence of any oral or written contract to repay, but the responsibility was rested on the guaranty to make whole the directors of the Delaware company who might make advances. An affidavit of defense was filed, *83
denying the right to judgment. After the taking of some testimony at the trial which followed, it was agreed by the parties that the jury should be discharged and the case heard by the trial judge. Facts were found, which are conclusive upon us, as if found by a jury (McDonald Construction Co. v. Gill,
It is first insisted that the undertaking of the Delaware corporation to indemnify any director who made advances to the Pennsylvania company was an original one, the agreement to guarantee being for the benefit of the former, since it was interested as a prospective shareholder in the prosperity of the latter. It was therefore contended the statute of frauds had no application, and the proof of any writing was not required. "While no rule can be easily expressed by which to determine in all cases whether a promise to be responsible for the debt or liability of another is or is not within the statute it is a general rule that when the leading object of the promise is to become guarantor or surety for a debt for which a third party is and continues to be primarily liable, the agreement, whether made before or after or at the time of the promise of the principal, is within the statute and of no effect unless in writing": Shannon v. American I. S. Mfg. Co.,
Many cases will be found, of which instances are given in appellant's brief, where parties in furtherance of their individual interests have agreed to pay claims due by another, and the statute of frauds has been held inapplicable. This rule has been held at times in corporate matters where the guarantee was by an officer, director or creditor, and a promise is made by such person directly with one advancing money or materials on the faith thereof, though there was incidentally a benefit arising to the company, since in such cases the contract must be held to have been entered into for the personal advantage of the promisor (Lincoln Bank of Erie v. Gem Wholesale Grocery Co.,
Ordinarily, the interest which a stockholder has is not individual, for he cannot be held for the corporate debts, and, if a promise to indemnify its creditor is made, the statute of frauds applies: 25 R. C. L. 509. The mere fact that such person is concerned in promoting the financial success of the company is not sufficient to justify the treating of the promise of guaranty as an original undertaking: Richardson Press v. Albright,
If, as we hold, the promise was not an original, but a collateral, undertaking, then the statute applies. No contract, oral or written, is set up in the statement filed, and no averment that the required writing (Nugent v. Wolfe,
It was further urged that defendant, having failed to expressly plead the benefit of the statute, cannot now take advantage of its provisions. The authorities in other jurisdictions are in conflict as to the necessity of specially pleading the want of a proper writing to support the guaranty of the debt of another. In some, the defense has been held to be personal, which the defendant may or may not take advantage of, as in the case of the statute of limitations. In Pennsylvania this has not been declared, but it has been held that judgment should be entered for the defendant where the evidence shows the contract not to be legally sustainable. In Mason-Heflin Coal Co. v. Currie,
It was suggested by defendant that the contract to indemnify, under consideration, was ultra vires, and for this reason could not be enforced (Gilchrist's Case, 278 Fed. 235; Culver v. Reno Real Estate Co.,
The judgment is affirmed.