101 N.Y.S. 513 | N.Y. App. Div. | 1906
Lead Opinion
The defendant was a director in a corporation known as the .American Beer Cask Company, and was also its secretary and treasurer. This corporation kept an account in the plaintiff bank, the president of the' bank being a director. At a meeting of the directors on April 12, 1900, four directors being present, the question as to' borrowing money for the corporation was discussed, and it seems that it was proposed to have a note for $2,500 discounted.
Mr. Wallach, one of the directors who was present at this meeting and who joined in this guarantee, testified that in this conversation the president of the plaintiff “ offered to advance the company whatever money the company required, provided that we who were there would be responsible for it; ” that he objected, to a joint responsibility, but said: “ I am willing to take my share of the responsibility, but I won’t guarantee the whole amount.” To this plaintiff’s president responded : “ All right, gentlemen.” He testified further that “ the statement made by Mr. Schlesinger was that the bank would not, of course, advance any money to the company, as it had substantially no cash or convertible assets, but he would loan the money if we would pay it or be responsible for it to the bank.” The promissory note introduced in. evidence was the last of the several renewals and was a note of the American. Beer Cask Company dated August 22, 1901, by which' the company promised to pay $2,500 to its own order one month after date.
The only, question upon this appeal is whether this promise was within the Statute of Frauds as being a promise to “ answer for the debt, default or miscarriage ” of the American Beer Cask Company. That statute provides (Pers. Prop. Law [Laws of 1897, chap. 417], § 21) that “ Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing
The difficulty of determining whether' a promise to pay a debt is Collateral or original is recognized by many'of the authorities in this State. The question has -generally been presented in a case where there was an existing antecedent indebtedness of some third party at the time the promise .was made. That was the situation in Mallory v. Gillett (21 N. Y. 412). In that case one Haines owed the plaintiff a debt for repairs on a boat, for which the. latter had a lien on the chattel. In consideration of the relinquishment of that lien and of forbearance to sue the original debtor the defendant promised the plaintiff, without writing, to pay the-debt at a certain future time. The court held that there was a good consideration for this promise, but that it was to answer for the existing and continuing debt of another, or, in other words, it was a collateral promise. In discussing the liability of the defendant on such a promise ' the court said: “ Wliat is a proihise to. answer for the ‘ debt of default ’ of another -person ? Under this language perplexing questions may. arise and many have-arisen in the courts. But some propositions are extremely plain; and one of them is, that the statute points to no distinction between a, $ebt created at the time when the collateral engagement is made and one having a previous existence. The requirement is, that promises to answer for the debt, etc., of a third person be in writing. The original and collateral obligations may come into existence at the same time and both, be . the foundation of the credit, or the one may exist and the other be created afterwards. - In either case, and equally in both, the inquiry under -that statute is, whether there be a debtor and -a surety, and not when the relation was created. The language of the enactment . is-so plain that there is. no room for interpretation,'..and its policy is equally clear. If A say to B, ‘If yoti will suffer 0 to indtir a debt for goods which you will now or hereafter sell and deliver to him* I will see you paid,’ the promise is Within the statute. This iio one ever doubted. But if A say to B, ‘ If you will forbear to sue- O' 'for six months- on a debt heretofore incurred by him for goods sold aiid delivered to him, I will see you paid,’ is not the case equally
I have quoted at length from the prevailing opinion in Mallory v. Gillett (supra).as it seems to me that it comes nearer to. establishing a test-to determine just what promises are “original” and what “ collateral ” than any of the prior cases which are there discussed. In White v. Rintoul (108 N. Y. 222) the case of Mallory v. Gillett (supra) was cited as establishing the proposition that the consideration for the new promise, in order to be original, must move to the ■promisor and be beneficial to him, and it was. held that this expression Was understood to mean “ not merely some moral or sentimental object, but to relate to a légal interest or purpose tangible by the law ' and a product of the consideration received from creditor or debtor!”
I do not understand that there is any distinction between a case where an antecedent indebtedness existed at the time of the promise and a case where the indebtedness is created subsequent to the promise. The liability of the promisor must in each case he deter-, mined by the nature of the promise, whether it was to answer for the debt of a third person or whether it was to answer for his own debt. In this case, was the note of the beer cask company that was discounted by the plaintiff and the checks of the beer cask company which were paid by the plaintiff and which created the overdraft, a loan to the corporation which the defendant and his copromisors agreed to guarantee or pay. if the beer cask company did not? It is undoubtedly true that the money was advanced to the beer cask company in reliance upon the promise of the defendant and his copromisors to be responsible for the loan, but it was clearly a loan to the company and not to the promisors. Mr. Wal
The plaintiff’s president testified that “ the conversation was about borrowing some money/for the Company, and I told them that the bank would-not loan the American Beer Cask Company any money, as they do not loan money to corporations. Then they all agreed to loan this money, and each one would guarantee their proportionate share for the amount of that note, or any moneys that would be ■ wanted for the benefit of the American Beer Cask Company.” On cross-examination he said: “ The amount of money which I say Mr. Stettheimer in common with others guaranteed to make good to the bank was such moneys as should be advanced by the bank on notes or overdrafts after that date; ” and on the faith of this agreement the plaintiff advanced pot to the-promisors but to" the company, . and the advances were used by the company in the transaction of its business. The subsequent transactions were all between the company and the plaintiff; its note was discounted by the plaintiff and was renewed from time to time; its checks were paid by the plaintiff, as presented. The bank could not have collected from the defendant and his co-promisors the amount of this note, which it had discounted, until the note became, due. The whole course of business shows that it was the company to which the bank advanced the money, and, it was the company that was primarily responsible for the amount of the note and of the overdrafts. The promise was to guarantee or be responsible for the amount of the note "of the com'pany that the bank discounted, or of the overdrafts made by the company. Within the rule established in this State, this was the company’s' debt and' the agreement sought to be enforced was an agreement to answer for the company’s debt and not for the debt of the promisors. I think this promise was within the statute and is, therefore, void.
It follows that the judgment and order appealed from must be reversed and a new trial ordered, with costs to the appellant to abide the event.
Houghton and Soott, JJ., concurred; Patterson* J., concurred in result; McLaughlin, J., dissented.
Dissenting Opinion
I dissent. The money in question was loaned to the beer cask company, in reliance upon the promise of the defendant and his copromisors to pay the same, and this seems to be conceded in the' prevailing opinion. It was, therefore, an original and not a collateral promise. The plaintiff would not have made the loan except for this promise, which does not come within the Statute of Frauds, as being a promise “to answer for the debt, defaulter miscarriage” of another.
I vote to affirm the judgment.
Judgment and order reversed, new trial ordered, costs to appellant to abide event. Order filed.