Small v. Schaefer

| Md. | Mar 3, 1866

Bowie, C. J.,

delivered the opinion of this Court.

McGinn, a broker, being indebted to the appellant for money advanced to be invested in bonds, and to the appellee for money had and received to his use, gave the appellee his check, post dated April 22nd, 1861, for $1,391.50, on the Franklin Bank of Baltimore, stating at the same time he had some State bonds or other securities which he would deposit with the bank to make his check good.. Subsequently, he deposited five State bonds of $1,000 each with the cashier of the bank. After the deposit, the bank overpaid checks of McGinn to the amount of $890, but refused to pay his check to the appellee.

Three of the bonds deposited had been purchased upon the order of the appellant, with funds advanced by him, but never delivered to him, yet marked in pencil, with the initials of appellant. These bonds were transferable by delivery, and from aught that appears, neither the bank, nor the appellee were aware of the appellant’s claim to a part of them. McGinn failed a few days after depositing the bonds in bank. When the appellant called on him, McGinn told the appellant, the bonds were pledged with the bank to secure the overpayment and check to the appellee ; upon which the appellant proposed, if McGinn would give him an order for the live bonds, he would make good the amount due on them to the bank, and also pay McGinn’s check to the appellee, to which McGinn agreed. The appellant presented two orders, one in favor of himself for three bonds; another in favor of Robert Jenkins for two, which were signed and delivered to the appellant. Upon presentation of the orders and payment of the $890, the bonds deposited were delivered. After the bonds had been obtained, McGinn and the appellee called on the appellant, to inquire why the check had not been paid, and the .appellant admitted his promise to pay, but said he was too smart to pay that check and had procured the bonds without paying more than the bank’s advances.

The appellee sued the appellant. At the trial it was agreed, "all errors in pleading are waived, and either party may offer in evidence andhavethe benefit of any special matter, in the same manner as if it had been specially pleaded.”

The appellant excepted to the prayer granted by the Court, at the instance of the appellee, and the rejection of the 1st, 3rd, 5th and ?th prayers offered by himself. The verdict and judgment being against him, he prayed an appeal.

The questions raised upon these exceptions are :

1st. Was there a privity of contract sufficient to entitle the appellee to sue ?

2nd. Was there a consideration for the supposed contract of the appellant ?

3rd. Was the contract within the statute of frauds ?

The appellant’s 5th prayer raises the separate question of want of consideration, unless the appellant’s undertaking was founded on the delivery of the order to him in favor of Jenkins, which may he considered a branch of the 2nd point.

The prayer of the appellee, being founded on all the facts, assuming them to be proved to the satisfaction of the jury, it became the cluty of the Court, to decide whether the law, under the circumstances, would oblige the appellant, to pay to the appellee the amouut of McGrinn’s check. It is not necessary to create such an obligation, that the consideration should proceed directly from the plaintiff or the promise be made directly to him. The result of the more modern decisions is clearly condensed by Professor Parsons in his Law of Contracts, title “Consideration.” After stating the ancient doctrine based upon English authorities, he says : “In this country, the right of the third party to bring an action on a promise made to another for his benefit, seems to be somewhat more positively asserted, and we think it would be safe to consider this the prevailing rule with us. * * * Such a promise is to be deemed made to the third party, if adopted by him, although he was not cognizant of it when made. 1 Parsons on Contracts, 466, 467, 468.

Shaw, C. J., in the case of Carnegie vs. Morrison, 2 Metcalf, 402, after reviewing the English and American decisions, lays it down as settled in Massachusetts, ever since reports of cases have been published, that “ when one person, for a valuable consideration, engages with another, by simple contract, to do some act for the benefit of a third, the latter, who would enjoy the benefit of the act, may maintain an action for the breach of such engagement.” This position, he says, is sustained by citations from Cormyn’s Digest and Rolle’s Abridgement.

Bigelow, J., delivering the opinion in Brewer vs. Dyer, 7 Curtis, 340, refers to Carnegie vs. Morrison in these terms: “In the latter case, all the authorities are fully reviewed in the opinion of the Court, and the rule of law clearly vindicated and established. It does not rest upon the ground of any actual or supposed relationship between the parties as some of the earlier cases would seem to indicate ; Dutton vs. Poole, 1 Vent., 318. 2 Walford on Parties, 1144, nor upon the reason that the defendant, by entering into such an agreement, has impliedly made himself the agent of the plaintiff ; by Coleridge, J., in Lilly vs. Hays, 5 Ad. & El., 551; but upon the broader and more-satisfactory basis, that the law, operating on the act of the parties, creates the duty, establishes the privity, and implies the promise and obligation on which the action is founded. 7 Cush. Rep., 340.

In Owings vs. Owings, 1 H. & G., 484, this Court adopt the principle, “that where one person makes a promise to another for the benefit of a third person, the third person may maintain an action on such promise,” but in that case there was no new consideration for the promise, by the-defendant, to pay the commissions to the children, but a mere promise to pay a pre-existing debt, due to the mother, to the children, without showing any interest on their part in the subject matter of the promise, beyond the relation of parent and child.

The case of Kent & Lyles, 7 G. & J., 76, shows that a verbal promise to pay a claim of another against the promisee, may be sustained by the substitution of a note by the promisee for his alleged acceptance to the promisor. It was held that “under all the circumstances of dispute and anticipated difficulty, in relation to the acceptance, the adjustment of them all, by giving the note for the amount claimed by the defendant, was sufficient consideration for the agreement to indemnify.”

The appellant’s second objection is, that there was no consideration for the promise, unless the jury find that the appellant, in consideration of receiving the order for two bonds, in favor of Jenkins, promised McGinn he would pay the appellee the amount of McGinn’s check to him.

This point embraces the appellant’s thiid and fifth prayers, the former being a denial of any consideration, the latter, a qualified or special denial.

The absence of all consideration is based upon the argument, that as to three of the bonds, those were purchased with appellant’s funds, and had an ear mark upon them which made them the property of the appellant, and being entitled to his own, their delivery to him constituted no consideration for his promise, and as to the two other bonds these being delivered to Jenkins, did not enure to the appellant’s benefit, and were alike inoperative asa consideration.

If the evidence of the agreement between the appellant and McGinn, is assumed to be true, (which for the purpose of these prayers is inevitable,) the contract was one and indivisible; one consideration and one promise. The parties contracted for the delivery of jive bonds, in consideration of which, the checks for which they were pledged were to be made good. Small thus sanctioned the act of McGinn. The subsequent division of the bonds between himself and Jenkins was entirely the act of the appellant. It was improper to grant an instruction upon a hypothesis foreign to the facts. Its tendency would have been to mislead. The entirety of the consideration made it immaterial what claims the appellant set up to a portion of thebonds. If he had claimed the whole, the adjustment of his claims upon McGinn, and avoidance of all further litigation to secure them, was a sufficient consideration to sustain his promise to pay the claim of the appellee ; the latter being prejudiced, and the former benefited, in proportion to their respective claims upon the bonds.

If the delivery of the two bonds to Jenkins was for the exclusive benefit of the latter, that advantage was obtained to the prejudice of the appellee, in consequence of the appellant’s promise, and whether he profited by the transaction or not, his obligation to perform that promise was the same in law. It results from these premises, that the prayers of the appellant denyiug the existence of a consideration for his promise wholly or in part, were properly rejected.

The third and last point arises on the appellant’s seventh instruction, which affirms that if the jury find that the defendant, in consideration of the delivery of five bonds named in the evidence, verbally promised to McGfinntopay his pre-existing debt to the plaintiff, then the promise is void and no action can be sustained thereon.

This prayer invokes the protection of the 4th section of the Stat. 29, Chas. II.

The facts bring the case clearly within the well known exceptions, to the operation of that statute. “Wherever the main purpose and object of the promisor, is not to answer for another, but to subserve some purpose of his own, his promise is not within the statute, although it may be in form a promise, to pay the debt of another.” 3 Pars. on Cont., pp. 24, 25. Nelson vs. Boynton, 3 Met., 396. Thus in Jones vs. Hardesty, 10 G. & J., 404, the main purpose of the firm being to procure the waiver of objections of a surety of a debtor, to an assignment of assets for the benefit of the firm, the verbal obligations of the firm to pay the debt due by the principal to Mr'. Harwood, in consideration of that waiver, an assignment was held not within the statute. 3 Met., 396. 7 Cush., 136, 11 G. & J., 418; vide also opinion of Shaw, C. J., in Alger vs. Serville, 1 Gray, for a very lucid exposition of the words “debt of another,” referring with approbation to 11 Ad. & Ell., 446. To the same effect is the case of Andre vs. Bodman, 13 Md. Rep., 254, where a number of cases from Williams vs. Lefer, 3 Burr, 1886, to Elder & Warfield, 7 H. & J., 396, are cited to sustain the same principle. The observation following the enumeration of certain cases, viz: “The cases show that there must be an extinguishment of the first debt, as a consideration for the new promise,” applies only to that class of cases where the creditor’s relinquishment of the first debt is the motive of the promise. It does not follow of course, where other inducements are held out, such as the assignment of property or relinquishment of liens, in consideration of which the promisor undertakes to pay the debt of another. In Jones vs. Hardesty, the first debt was, not relinquished, but retained and held by another up to the time of injunction. “It is not an attempt to establish orally two subsisting liabilities for the-same debt, to the same person, but a new and original obligation springing outof new considerations.

The point raised in the appellant’s supplemental brief as to the effect of the release to McGinn, executed by the appellee during the trial, does not appear to have been raised below ; it escaped the attention of the counsel in the preparation of their original elaborate briefs. Inasmuch as the-release was not offered in evidence, or incorporated in the bill of exceptions, it is by no means clear that this Court can entertain the inquiry. Without an inspection of the paper it would be impossible to pronounce any opinion as to its legal effect. Since the argument, however, the counsel have by consent furnished a copy of the release, which on inspection appears to have been so qualified in its terms-as to operate only to discharge McGinn from liability to the appellee, reserving “the right to proceed against any and all other parties, who may in any manner be liable,” etc., which, in the opinion of a majority of the Court, rendered-McGinn competent, if he was before incompetent, without prejudice to the right of action of the appellee.

(Decided March 3rd, 1866.)

Finding no error in the rulings of the Court below, the judgment will he affirmed.

Judgment affirmed.