Rowell v. Smith

123 Wis. 510 | Wis. | 1905

Marshall, J.

The logical treatment of this appeal seems to require the contention of respondent’s counsel that the decision in the action to enforce the four-year note is a bar to any relief in this action upon principles of res adjucficaia to be first considered. The scope of such principles has been too often pointed out to require more than a statement thereof at this time. A judgment whether pleaded in bar, or given, in evidence in estoppel, as to every question within the issues in the cause wherein it was rendered, whether actually presented and solved or not, as between the parties to the litigation and their privies, till reversed or set aside in due course' of law, — is conclusive as to the truth of the matter involved in that and any action subsequently tried to' enforce the same-cause of action whether in the same or in any other'court,, and it is likewise conclusive in any subsequent judicial controversy upon a different cause of action between the same parties, or their privies, as to any question within the issues-actually presented and decided. Wentworth v. Racine Co. 99 Wis. 26, 74 N. W. 551; Grunert v. Spalding, 104 Wis. 193-213, 80 N. W. 589; Hart v. Moulton, 104 Wis. 349-353, 80 N. W. 599. A cause of action for equitable relief' from' the consequences of accepting a void guaranty is essentially different from an action upon the guaranty. The former action proceeded upon the theory that there was a valid contract between the parties, while this action was grounded upon the theory that at best there was only an enforcible agreement to make such a contract. Hence, in any event,, only the results of questions actually presented and adjudicated before need be considered now on this branch of the-case. Such results are veidties for the purposes of this litigation. The parties are not the same now as before, but the respondent is the personal representative of Smith, and as such a privy as regards the former suit, while the plaintiff now was, in the main, the party interested then and is bound the same as if he were a party to the record. The action was prosecuted in his interest. He had notice thereof, an opportunity to participate therein, and embraced it. As between him-and his assignee of the note, in whose name the suit was brought, the result here was conclusive, the same as-between such assignee and the defendant. In such circumstances, for all purposes of the doctrine of res adjudicata he was a party to tbe suit. Saveland v. Green, 36 Wis. 612; Daskam v. Ullman, 74 Wis. 474-477, 43 N. W. 321; Carroll v. Fethers, 82 Wis. 67-72, 51 N. W. 1128; Grafton v. Hinkley, 111 Wis. 46-54, 86 N. W. 859. Tbe important question common to botb actions and decided on tbe former occasion [Commercial Nat. Bank v. Smith, 107 Wis. 574], is whether tbe guaranty was based on a consideration independently from that afforded tbe maker of tbe note, and moving from tbe guarantee to tbe guarantor so as to take tbe transaction out of tbe statute of frauds. That was decided before in favor of tbe decedent. Tbe case turned on the solution of that question on tbe appeal to this court. It follows that, regardless of tbe evidence now in tbe record and even tbe findings of tbe trial court, if contrary thereto, this case must be viewed as if Smith’s promise was merely collateral to that of 'Goodrich and so within tbe statute of frauds.

Except as above indicated, the doctrine of res adjudicata does not bar tbe way to favorable consideration of appellant’s appeal. Tbe mere fact that in the former action it was claimed there was a guaranty good at law, and on tbe second occasion that must be deemed to have been abandoned and tbe action grounded on a transaction not culminating in a legal contract as intended, is not sufficient to render tbe former judgment a bar to tbe successful prosecution of this action upon principles of res adjudicata.

We are not unmindful of tbe decisions that a judgment in an action to recover on a contract of a particular character is a bar to one subsequently commenced involving tbe same transaction, either at law or in equity, upon tbe theory that the contract was not as at first alleged, but of a materially different character. There is a logical basis for such decisions, but it doe» not lie in tbe doctrine of election between inconsistent remedies or res adjudicata, but rather in tbe doctrine of estoppel. Some of such cases plainly, it would seem, confuse tbe two former doctrines and overlook tbe latter. True, the distinction between estoppel and res adjudí-cala is sometimes so shadowy that one, without careful analysis, would blend into the other.. Nevertheless there is a distinction. We will not stop in our labor here to point it out,, but assume that its existence is well understood.

Washburn v. Great Western Ins. Co. 114 Mass. 175, is one of the most significant of the cases above referred to. From our investigations we may well venture to say it is the pioneer case. There plaintiff brought an action to recover on a policy of insurance containing a warranty. He pleaded compliance therewith. Upon being defeated for a breach thereof he filed a bill in equity for a reformation of the policy by striking out the warranty, alleging that the same was contrary to the verbal agreement and was inserted in the writing by mistake. The court held that the judgment in the first action was a bar to the prosecution of the second, the decision being put squarely on the doctrine of election. Reference was made thereto in this way, quoting the language of Chancellor Kent :

“The suit at lav/ and the action here are inconsistent with each other, since the one affirms, and the other seeks to dis-affirm, the contract in question. Any decisive act of the party, with knowledge of his rights and of the fact, determines his election, in the case of conflicting and inconsistent remedies.”

We fail to see wherein the remedies the court was dealing with were conflicting and inconsistent within that rule. Both proceeded upon the ground that there was a contract. If it was as at first alleged, an action at law was the only remedy to enforce it. If it was as alleged on the second occasion, an action in equity for a reformation thereof was the only remedy. The doctrine is well established that there can be no choice between two inconsistent remedies unless there are in fact two remedies to choose from, and they are really inconsistent, in that one is suitable to deal with relations between the parties of one character and tbe other with relations of a different and inconsistent character. The rule, it will be seen, was correctly illustrated by the court, but improperly applied. Fuller-Warren Co. v. Harter, 110 Wis. 80, 85 N. W. 698. It might well have said that the plaintiff was estopped from successfully invoking equity to enforce a contract of one character after, with knowledge of the facts, having put the defendant to the expense of defending in an action at law against a claim that it was of a different character. It is significant that it did not occur that the decision could be grounded upon the doctrine of res adjudícala.

In Steinbach v. Relief F. Ins. Co. 77 N. Y. 498, the circumstances were the same as in 1 Yasliburn v. Great Western Ins. Co. supra, and the result the same. It was based, however, upon the doctrine of res adjudícala and it would appear that of election as well, Washburn v. Insurance Co. being pointed out as authority, without indicating that the inconsistency of grounding one case on the doctrine of res adjudir cata and the other on the doctrine of election was appreciated. In support of the Massachusetts decision there was at least noted a prime essential of the situation permitting the exercise of election between inconsistent remedies, viz.: “The stale of facts necessary to support one remedy did not coincide with the facts necessary to support the other.” Barth v. Loeffelholtz, 108 Wis. 562-568, 84 N. W. 846. It may be well assumed that such feature led to the decision being grounded as it was, though manifestly such a situation may ancT does often exist where other essentials to the application of the doctrine of election are absent. In the New York case, though the two are alike, the court considered that the same evidence would sustain either claim, which seems to be clearly contrary to the fact, and so justified the result upon the doctrine of res adjudícala, at the same time using terms indicating that the doctrine of election applied as well.

Thomas v. Joslin, 36 Minn. 1, 29 N. W. 344, is another case of the character referred to. Both cases we have discussed are cited therein as authority for the conclusion reached. The doctrine of election and of former adjudication were both referred to, and, as in the other instance, without appreciating the distinction between the two. That is quite clear, in that it was not seen that the Massachusetts case went distinctly upon the ground of election while the New York case, though it went upon the doctriné of res adjudí-cala, referred to the Massachusetts case for authority. In a later case the Minnesota court recognized that Thomas v. Joslin, supra,, turned on the doctrine of election. Spurr v. Home Ins. Co. 40 Minn. 424, 42 N. W. 206. But a distinction between the two cases was suggested, in that in the former situation the 'first case proceeded to final judgment, while in the latter it did not. The circumstance was rightly deemed important as regards the doctrine of res adjudícala or estoppel, but not that of election, since any affirmative act with knowledge of the facts to enforce one remedy, such as the commencement of an action, as effectually waives all other remedies as the prosecution of an action to judgment. Smeesters v. Schroeder, ante, p. 116, 101 N. W. 363. In a still later case, Rossman v. Tilleny, 80 Minn. 160, 83 N. W. 42, as we read it, a situation similar to that in Thomas v. Joslin, supra, was presented. Defendant was put to the expense of a successful defense to a claim against him for stipulated compensation for professional services. Plaintiff persisted until judgment was rendered against him. He then commenced a new action upon the theory of implied contract and Thomas v. Joslin, supra,, was invoked in vain, the court romarking as to the latter situation that the evidence required in the two actions was different, inferentially saying that in the former situation it was not, which seems plainly to be contrary to the fact, and to the prevailing idea in the case, which was there pointed to as authority, viz.: Steinbach v. Relief F. Ins. Co. 77 N. Y. 498. However, in this later case we find suggested for tbe first time wbat seems to be tbe only legitimate basis for tbe decision in Thomas v. Joslin, 30 Minn. 1, 29 N. W. 344, in tbis language: “It was properly held” there, said tbe court, “. . . that plaintiff was es-topped, having elected to stand trial in tbe first action on tbe Incomplete contract.”

We have discussed at some length Washburn v. Great Western Ins. Co. 114 Mass. 175, and tbe cases based thereon, ■since it seemed that if they were rightly grounded on tbe doctrine of election or that of res adjudicata they might be decisive on tbis appeal. We do not think that they were, neither do we think that as vindications of tbe doctrine of estoppel in pais they should influence tbe decision here. Doubtless, if a person with knowledge of tbe facts invokes a judicial remedy upon one theory, as regards a particular subject-matter,- — for example, that it produced a contract of one character, — and compels his adversary, at considerable expense, to successfully defend against such theory, it would be inequitable, at least, to permit such person to again use a judicial remedy, though consistent with'the other, to recover on a different cause of action than at first alleged, — one not affected by the doctrine of res adjudícala or the election of remedies, but proceeding upon the theory that the transaction in question produced a contract differing somewhat from that first alleged. The defendant might, in some circumstances, invoke the equitable principle of estoppel in pais against the vexatious litigation, but we cannot discover that there was any such situation here. The action commenced by the bank upon the four-year note was instituted and prosecuted upon the theory that the facts now relied upon as a ground for relief, entitled the holder of the note to legal relief upon a contract of guaranty. There has been no change of position by the plaintiff, as regards the facts. It having been decided in the legal action that they were not sufficient to make a guaranty good at law, he invoked equity to grant such relief as it can afford, in view of tbe evident purpose of' tbe parties to make sucb a guaranty.

Wbat bas been said sufficiently answers tbe contention of' counsel for respondent that tbe commencement of tbe action on tbe four-year note was an election of remedies. There is-mucb inaccurate language in authorities on this subject. A mere eloction of remedies, where there are several, does not waive others. Barth v. Loeffelholtz, 108 Wis. 562, 84 N. W. 846. It is only where, as before indicated, there are several remedies which are inconsistent that the choice of one waives, the rest. Such inconsistency is to be looked for in the relation between the parties which the different remedies suggest. If one sues for damages for breach of or to otherwise recover on contract corresponding relations are necessarily alleged or implied to exist, while, if growing out of the same-transaction, that one sues to recover property parted with to the defendant on contract a termination of contractual relations by rescission is suggested. In one case a subsisting contract is assumed or alleged, in the other absence thereof is-necessary. Failure to note the true tost of whether the doctrine of election applies or not has led to so many instances-of improper references thereto that great care must be exercised in the selection of judicial guides in a given situation or one will be liable to go astray. Where more than one-remedy to deal with a single subject of action exists and they are inconsistent with each other, after the choice of one the others to all intents and purposes no longer exist. Where inore than one remedy exists to deal with a single sxibject of action, but they are not inconsistent, nothing short of full satisfaction of the plaintiff’s claim waives any of such remedies. All may be pursued concurrently, even to judgment, but satisfaction in one reaching the whole claim is a satisfaction in all. Where only one remedy exists, but the plaintiff' asserts one which he does not in fact possess, the proper remedy is not waived. In a late work the author rightly remarks-tbat tbe “test seems easy of application, yet tbe fact bas not prevented confusion and a degree of contradictions in reported cases.” It will not do to take it for granted tbat when election of remedies is spoken of in a judicial opinion, tbe principle tbat tbe selection of one remedy waives tbe use of’ all others was involved. 7 Ency. Pl. & Pr. 363.

Tbe purpose of tbe action on tbe four-year note was to-vindicate tbe rights of appellant as to tbe subject-matter in question by recovering on contract. Tbe transaction claimed at first is identical with tbat claimed now. The fact tbat in-one case it was claimed tbat it created a contract good at law and in tbe other one good in equity, or tbat tbe failure to create, as was intended, a contract good at law or in equity, created obligations of equivalent dignity in equity, does not satisfy the rule tbat a choice of one remedy waives tbe others.. It is by no means uncommon to bring an action upon a .written contract, and upon its subsequently appearing tbat the-writing was not made as intended by both parties, to invoice-equity jurisdiction to reform and enforce it as perfected. Wisconsin M. & F. Ins. Co. Bank v. Mann, 100 Wis. 596, 76 N. W. 777, is a significant instance thereof.

If there were no other answer to tbe suggestion tbat tbe commencement of tbe first action waived all other remedies against Smith, or his personal representative, a conclusive-one would be found in tbe fact tbat if any effective remedy at all existed for appellant it was to be found in equity, while tbe one chosen was at law. As before indicated, it is a cardinal principle of tbe doctrine of election tbat it is to be applied only where there is opportunity ;to choose between two- or more remedies which are appropriate.

Tbe doctrine of laches is invoiced by respondent in support of tbe judgment. Delay in a case like this evidencing acquiescence or tbat no mistake was in fact made is one thing, while delay to insist upon one^s rights as to a mistake-known to exist is quite another. Tbe former is not claimed in tbis case. Delay, under some circumstances, is as efficient to extinguish the right as the statute of limitations, but in itself it is ineffective as a defense. It is not a bar in equity when it would not be at law, in the absence of circumstances rendering the late assertion of the right so prejudicial to the adverse party that it would be inequitable to permit it to be done successfully. Kropp v. Kropp, 97 Wis. 137, 72 N. W. 381. There was no unreasonable delay here. This action was commenced promptly after the termination of the one at law, which irrevocably established as a fact that the remedy first asserted was inappropriate, even if the factó* were as alleged.

The point is made that if there was a mistake in reducing the verbal agreement to guaranty the notes to writing, it was one of law and hence irremediable. A mistake of law as well as of fact may, in some circumstances, be remedied. The general statement often indulged in that equity may relieve one from the consequences of a mutual mistake of fact, but not from a mistake of law, is very misleading. Error as to the sufficiency of language to put in legal form a transaction upon which the minds of two parties have met, may be as effectually dealt with as one purely of fact. Upon due consideration in Wisconsin M. & F. Ins. Co. Bank v. Mann, supra, the rule was stated thus:

“A mistake in the contract itself, springing from ignorance of the law, is one thing, and mistake in the legal meaning attributable to the words used to express a contract is quite another. . . . Where there is a mutual mistake, either of fact in making a contract, or of law or fact in the reduction of the contract to writing, the person injured thereby may have it reformed in equity in accordance with the truth, in the absence of facts or circumstances constituting a waiver of the remedy or an estoppel to the assertion of it.”

To the same effect are Green Bay & M. C. Co. v. Hewitt, 62 Wis. 316, 21 N. W. 216, 22 N. W. 588; Silbar v. Ryder, 63 Wis. 106, 23 N. W. 106; Whitmore v. Hay, 85 Wis. 240, 55 N. W. 708; Beardsley v. Knight, 10 Vt. 185; 2 Pomeroy, Eq. Jur. (2d ed.) §§ 843-845.

We now come to tlie question of whether a mistake in reducing to legal form a mere collateral promise to answer for the debt, default or miscarriage of another it relievable by the equitable remedy for reformation or specific performance. The finding that the corporate stock was sold and transferred to Goodrick upon the faith of Smith’s agreement to guaranty payment of three fifths of the purchase price thereof is urged 'upon our attention. As an original matter, we should say that comes far short of finding that the performance by appellant of the main contract was beneficial to Smith, so as to render the transaction between them independent of that between the former and Goodrick, satisfying the rule declared in Commercial Nat. Bank v. Smith, 107 Wis. 574, 83 N. W. 766, or to suggest that there was fraud in fact or in law in the failure of Smith to execute a valid guaranty. The distinction between a purely collateral undertaking, which is within the statute of frauds, and an original promise which may also be secondarily collateral to another, but is, nevertheless, without the statute, is well stated in Steams, Law of Suretyship, § 39, in these words:

“A distinction must be made, however, between a beneficial consideration, which is a men? inducement to enter into the suretyship contract, and a beneficial participation in the main contract. It is the latter only which takes the case out of the statute. The promisor may receive a money consideration for his promise, or he may be, induced to make the contract for other valuable considerations beneficial to him, yet it will be void if not in writing, but'if the performance of the main contract, to which his suretyship is collateral is a benefit to him, a verbal promise fin guaranty is sufficient.”

Illustrations of the application of that principle are found in the following cases: Dyer v. Gibson, 16 Wis. 557; Houghton v. Ely, 26 Wis. 181; Hutson v. Field, 6 Wis. 407; Borchsenius v. Canutson, 100 Ill. 82; Fears v. Story, 131 Mass. 47; Bluthenthal v. Moore, 106 Ga. 424, 32 S. E. 344; Davis v. Patrick, 141 U. S. 479, 12 Sup. Ct. 58. But, as we have heretofore indicated, if there were any doubt as an original proposition as to whether appellant’s promise was collateral and within the statute of frauds, that doubt could not be resolved in favor of appellant, whatever construction might be put upon the findings of the trial court, since the former adjudication of the matter is conclusive in favor of the respondent. We should not have discussed the matter at all, other than to show that it was covered by such adjudications, were it not for the fact that it is made quite prominent in appellant’s argument.

So, as before stated, the case comes down to this one proposition : Can a defectively written purely collateral promise to answer for the debt, default or miscarriage of another, by interference of a court of equity, — there being no question as to what the facts are and that the minds of the parties met on all the essentials of a verbal promise to make a valid guaranty, but through mutual mistake, without any element of fraud, they failed to embody it in the writing, — be reformed ■so as to make the same satisfy the statute of frauds? Or ■can, in such a case, a court of equity interfere and compel specific performance of the verbal agreement to make a valid guaranty ? ,

It will not do to hold that the mere delivery of the consideration as between the original parties to the contract, though sufficient to support a guaranty, if one be properly made, is a part performance of a verbal contract to make a valid guaranty, taking the latter out of the statute of frauds, under the familiar principle that where relations between parties to a verbal agreement required to be reduced to writing to satisfy the statute of frauds and so give it validity, have so far ceased to be executory as to one party thereto that it would operate as a fraud upon him to permit the other to successfully put up the statute of frauds as an excuse for nonperformance, — a court of equity, while respecting tbe statute, will lay its bands upon tliat other and enforce obligations deemed to have been created by the circumstances not within the statute, but resting upon him in good conscience with a corresponding equitable remedy to give them vitality; that equity thereby may leave the statute of frauds intact, yet satisfy the ends of justice by avoiding the injurious consequences that would, or might, otherwise flow from the mistake. It would take much time and require a very broad field to be explored to define the precise boundaries to which such obligations are deemed to be •cognizable by a court of equity, so that, while respecting the ■statute of frauds, it can prevent its being used to accomplish the very purpose it was designed to avoid. That it cannot be' carried so far as to entirely nullify the statute would seem not to be open to question. Courts of equity have been accustomed to take great liberties, and probably seldom too great, in this matter, but they have never gone so far but that in each instance it was at least assumed that the real policy of the statute was left intact.

The growth of equity in the line under discussion, while very rapid at first, has not perceptibly advanced in recent years. Many judicial warnings may be found in the books against any further development of the idea that the statute of frauds may be “uplifted,” so to speak, and the consequences of noncompliance with it thereby be avoided, pointing to instances where it was thought it had already been extended to the danger line, if not beyond, and suggesting that to further extend it would, in effect, avoid it altogether.

While it is true that equitable principles never necessarily remain stationary, that they may advance, from time to time, as the exigencies of new situations seenTto demand, to the end that justice may not fail of vindication, probably it is true that the needs of such a situation, affecting the statute of frauds or limitations, should be of an-extraordinary nature to justify a court in creating an essentially new precedent. In that regard such statute is quite as securely intrenched as-that of limitations. Regarding the latter it has been held that if one is merely betrayed into ignorance of his rights as to another by wrongful conduct of the latter until the time shall have expired for him to invoke judicial remedies to vindicate the same, such other is not thereby estopped from pleading-the limitation period in respect to the matter; that standing upon his statutory rights he may safely confess his misconduct and defy his adversary in any judicial forum. Pietsch v. Milbrath, post, p. 647, 101 N. W. 388; Bank of Hartford Co. v. Waterman, 26 Conn. 324. That fraud may go so far, however, as to any cause of action as to call for equitable protection against the consequences of the statute of limitations- or frauds, is recognized in some jurisdictions. Holloway v. Appelget, 55 N. J. Eq. 583, 40 Atl. 27; Fry, Specific Performance, § 552. But that is not here.

. The conflict in authorities as to- how far equity power may interfere to protect one from the consequences of non-compliance with the statute of frauds is well indicated in 2’ Pomeroy, Eq. Jur. §§ 864 — 867, and note on Glass v. Hulbert, 102 Mass. 24; Petesch v. Hambach, 48 Wis. 443, 4 N. W. 565. It is commonly said that “the statute is intended to prevent frauds and not to promote them,” and therefore courts will not give effect to efforts to turn the intended beneficent instrument into one with which to perpetrate injustice. Lex nemini facit injuriam. So far as that may legitimately go, the principle is one of inestimable value in judicial dealings with the affairs of men. True, the statute of frauds is no real obstacle in the way of administering equitable remedies so as to promote justice and prevent wi*ong, but in testing that principle by the proper limitations of the words “justice” and “wrong” the function of the legislature must be respected as to what is right. That which, operating in its proper sphere of action, the legislature has proclaimed to be right, must not be declared to be wrong with a corresponding remedial right in a judicial sense. It .having unqualifiedly stated that delay for a specified period of time after a cause of action shall have accrued to enforce it, shall be deemed to have extinguished it, the courts cannot legitimately ingraft exceptions upon the enactment. If the consequences in any given case are avoidable it must he one where that can be done and the statute be left really inviolate. Courts must regard wrongs not remediable because of the statutes as not wrongs at all, at least of any greater dignity than those breaches of moral obligations which must always be left to be redressed in other ways than by judicial tribunals, they not being within the maxim: “There is no wrong without a remedy.”

Counsel for appellant refer to authorities where there was part performance after the execution of the defective agreement, or where on- the faith of it at the time of the execution thereof one party thereto parted with value to the other, and subsequently a court of equity exercised its authority to prevent the consequences that would otherwise flow from the failure to put. the agreement in suitable form. In all such cases:, there are special circumstances referred to held sufficient to take the case out of the statute. To make those authorities,, which, of course, announce a very familiar principle, fit this, case in any view that can be taken of it, we must be able to-find special circumstances warranting the application thereof. There are none which we can discover. The verbal agreement, if we are to fall back on that, and the writing are so closely connected with each other and blended into one transaction as to be inseparable. "Whatever was done on the faith of one was grounded on the other. Whatever was done by appellant occurred as truly after the defective writing was made as after the agreement to make the writing. One was as infirm as the other, both at law and in equity. No consideration moved directly or indirectly to Smith, nor was any fraud, in fact or in law, perpetrated by him or could result from his acts, such as is commonly held sufficient to create an equitable obligation not affected by the statutes. So we have a clear case where by the policy of the statute it is conclusively presumed that the promisor did not intend to bind himself, and that the promisee has no reason to complain of his refusal to be bound, there being no evidence to the contrary created in the manner provided by law.

If we could treat the verbal agreement to* make a valid guaranty as separate from the writing, as before incidentally suggested, we would yet face the fact that the former is void because there was no circumstance rendering it a fraud in Smith not to perform it, so as to take it out of the statute. An agreement to make a collateral promise is as much within the statute as the promise agreed upon would be, if imperfectly reduced to writing. Wills v. Shinn, 42 N. J. Law, 138; Dee v. Downs, 57 Iowa, 589, 11 N. W. 2; Carville v. Crane, 5 Hill, 483; Bushell v. Beavan, 1 Bing. N. C. 103; Whitchurch v. Bevis, 2 Brown, C. C. 565; Wood v. Midgley, 5 De G., M. & G. 41; De Colyar, Guaranties, 59. This language is used on the subject in the work last cited:

“It has also been made the subject of discussion whether or not a promise to give a guaranty (as distinguished from a promise to procure one) is a special promise which falls within the statute. It is, however, obvious that a promise to .give a guaranty at a future time entirely falls within the mischief which the enactment was intended to guard against, .■and, indeed, that if the statute could be evaded by making such a promise it would be useless.”

The author quotes from the opinion of Pollock, C. B., in Mallett v. Bateman, L. R. 1 C. P. 163, as follows:

“If we were to hold that a contract of guaranty must be in writing but that a contract to give a guaranty need not, we should, I think, be committing the same mistake as our predecessors did with reference to the statute of uses. . . . ■Whether the decision of the courts of equity as to uses and trusts were beneficial or not I do not stop to inquire, but undoubtedly the whole doctrine arose out of a desire to frustrate the intention of the statute of uses. I trust 'that we shall not commit a similar mistake in construing the statute now under consideration.”

In Fry on Specific Performance of Contracts, at section 552, the use of equity jurisdiction to compel performance of a verbal agreement to make a guaranty in writing is spoken of thus:

“Such a procedure affords a most easy means of evading the intention of the statute, and introducing the mischief it was designed to remedy. . . . After a parol contract, a refusal to sign a written one is no fraud of which the court can take cognizance.”

It should be remarked in passing that the author was then endeavoring to define the limits of the doctrine, — having, of course, no application to this case, — that when the want of a writing is due to fraudulent prevention thereof by the person seeking to take advantage of the circumstances, he is estopped from obtaining such advantage. The general conclusion of the author is that the mere refusal to carry out a verbal agreement to execute a contract in writing good under the statute of frauds creates no remedial right in favor of the party to whom the agreement was made. That being so it certainly could create no such right in favor of a collateral promisee, who parts with nothing at the time of the promise nor is expected to thereafter to the collateral promisor. Nowhere is it suggested by the author, or by any one who has written on the subject, so far as we are able to discover, that failure to reduce a verbal agreement to writing, not characterized by fraudulent inducement or mistake, or by other special circumstances accompanied by such change of position on the part of the promisee beneficial to the promisor by part performance within the rule on that subject — that a failure to fully perform would work a fraud on him and be a fraud in the promisor.

In 'considering this subject we must not lose sight of the fact that equity ¿ever interferes to give one immunity, as to any transaction, from tbe consequences of tbe statute of’ frauds, unless those consequences would be not only a fraud' upon one but a fraud in tbe other party to tbe transaction. Fry on Specific Performance of Contracts, § 557. So the-whole doctrine as to part performance taking a transaction that would otherwise be within the statute of frauds out of it is based on the idea that the party seeking to shield himself behind the statute obtained something of value, and his adversary parted with it to him after the completion of the-agreement and on the faith of it. That could never occur ordinarily as to mere personalty so as to call into activity equity jurisdiction to avoid the otherwise consequences of the statute of frauds, since the part performance of itself would take the transaction out of the statute by creating a legal liability. Sec. 2308, Stats. 1898; Pomeroy on Contracts, sec. 100. From the fact that one who hides, so to speak, behind the statute of frauds, at law obtains title by force of such statute to something of value without rendering a just equivalent therefor, or being amenable to any legal remedy, springs the obligation on the one side and the corresponding-equitable remedy on the other. The principle has nowhere been more accurately and understandingly defined than by Lord Westbubt in McCormick v. Grogan, 4 H. L. 97, in these-words:

“The court of equity has from a very early period decided that even an act of Parliament shall not be used as an instrument of fraud; and if in the machinery of perpetrating a fraud an act of Parliament intervenes, the court of equity, it is true, does not set aside the act of Parliament, but it fastens on the individual who gets a title under that act,, and imposes on him a personal obligation, because he applies the act as an instrument for accomplishing a fraud. In this-, way the court of equity has dealt with the statute of frauds.”'

So here we find entirely absent the prime essential of part, performance upon which the appellant’s case is assumed to be grounded. Of course, part performance by Smith in that he made a-good guaranty on one of the notes when requested to some time after the making of the defective paper, does not count. A mere acknowledgment by one.entitled to the protection of the statute of the existence of a void obligation by partly performing it does not render further performance a fraud upon the promisee in any sense. Mere part performance as between the parties to the principal contract could not be held to take the collateral contract of suretyship out of the statute without nullifying it, because that necessarily occurs in every ease where the original promisee acts at all. McGaughey v. Latham, 63 Ga. 67. Said an eminent writer respecting the equitable doctrine of part performance of contracts of the kind under consideration, “There is no occasion or opportunity either for the equitable relief of specific execution, or the doctrine of part performance.” Pomeroy, Contracts, sec. 100.

We have not found it necessary in reaching a conclusion to consider whether an agreement of the sort here 'could, under any circumtances, be deemed in equity to have been taken out of the statute. Doubtless, in the main, at least, the doctrine in that regard is confined to contracts relating to lands (Pom-eroy on Contracts, sec. 101), and those which a court of equity would entertain a suit for specific performance of if they were in statutable form. Sec. 2305, Stats. 1898, refers only to such contracts and was doubtless supposed at the time of its enactment to cover those which courts of equity had been accustomed to deal with, saving parties, where necessary to prevent injustice, from the consequences of the statute of frauds. That does not prevent the same equitable principle from being applied to other situations, as the cases indicate that it has, but it suggests caution in the development thereof in going beyond the boundaries of precedent. The maxim “Lex deficere non debet in justitia exhibendaL (the law ought not to fail in showing justice), which is the guiding principle of equity and in harmony with which the doctrine was evolved, that when a situation is met with where the application of the statute would give one a right to the fraudulent despoliation of another, it may be deemed “uplifted” that an obligation springing from the relations of the parties and assumed to be outside of the statute may be enforced and injustice be thereby prevented, cannot be carried so far as to really nullify the statute without entering upon the broad field of judicial usurpation. The boundary would be crossed by equitable interference to give vitality to a mere collateral promise of surety-ship in which there was no consideration moving to the guarantor supporting the equitable remedy of reformation, or special circumstances supporting other equitable relief.

We have not discussed specifically the subject brought to our attention, of whether by the equitable remedy for reformation, a contract of guaranty, so called, not a contract at all, because, though in writing, not containing the statutory essentials, can have those essentials placed therein by a judicial decree. If it could, the statute would seem to have little force. Certainly any circumstance that would justify such an exercise of judicial authority would justify the use of the remedy for specific performance. Petesch v. Hambach, 48 Wis. 443, 4 N. W. 565. As we have found, the facts here will not support the former remedy, it seems plainer still they will not support the latter.

It follows that in any view that can be taken of this case the judgment appealed from cannot be disturbed.

By the Gourt. — Judgment affirmed.

Kerwiet, T., took no part.

Case Details

Case Name: Rowell v. Smith

Court Name: Wisconsin Supreme Court

Date Published: Jan 10, 1905

Citation: 123 Wis. 510

Court Abbreviation: Wis.