Bulkley v. Shaw

• Decision Date: 15 October 1942
• Citation: 44 N.E.2d 398,289 N.Y. 133
• Parties: BULKLEY et al. v. SHAW et al.
• Court: New York Court of Appeals Court of Appeals

289 N.Y. 133

44 N.E.2d 398

BULKLEY et al.

v.SHAW et al.

Court of Appeals of New York.

Oct. 15, 1942.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Jonathan Ogden Bulkley and another as surviving partners of the firm of Bulkley, Dunton & Company, 1939, in liquidation, against Albert Shaw and another, on a contract under which the defendants agreed to advance moneys to a corporation to enable it to finance an anticipated deficit for a certain period. From an order of the Appellate Division of the Supreme Court in the first judicial department, 292 App.Div. 196, 28 N.Y.S.2d 616, entered June 27, 1941, which reversed an order of the court at Special Term, Rosenman, J., granting a motion by defendants for a dismissal of the complaint and denied the motion, plaintiffs appeal by permission, 262 App.Div. 994, 30 N.Y.S.2d 809, and questions were certified to the Supreme Court by the Appellate Division.

Order of the Appellate Division reversed and of the Special Term affirmed and certified questions answered in the affirmative. William C. Scott, Barham R. Gary, and Donald W. Smith, all of New York City, for appellants.

Sherman Baldwin, Thomas F. Daly, and Sidney S. Coggan, all of New York City, for respondents.

CONWAY, Judge.

This is an appeal from an order of the Appellate Division, First Department, which reversed an order of Special Term granting defendants' motion to dismiss the complaint, made under rule 107 of the Rules of Civil Practice, on the ground that the alleged agreement on which the action is founded is void under the provisions of the Statute of Frauds (Pers.Prop.Law, s 31, subd. 2, Consol.Laws, ch. 41), and directed that the motion be denied.

The Appellate Division has certified the following questions of law to be reviewed by this court:

‘1. Is the agreement alleged in the complaint and upon which the action is founded void under the provisions of Personal Property Law, section 31, subdivision 2, as being a special promise to answer for the debt, default or miscarriage of another person?

‘2. Was the motion of the defendants-respondents to dismiss the complaint on the ground that the alleged agreement on which the action is founded is void under the provisions of the Statute of Frauds properly granted at Special Term?’

The contract alleged is substantially as follows: In 1937 the defendants owned or controlled all or substantially all of the stock of the Review of Reviews Corporation (hereinafter referred to as Review) and directed and controlled its affairs. Review published periodicals and magazines for the production of which large quantities of paper were required and large quantities of such paper were purchased by Review from the partnership of Bulkley, Dunton and Company (hereinafter referred to as Bulkley) during that year. During June of 1937, Review acquired a publication known as ‘The Literary Digest’ and commencing with July, 1937 published it under the name of ‘The Digest.’ Shortly thereafter the defendants prepared a proposed budget which showed that Review would incur a deficit of.$287,650 during the period from July 15, 1937, to January 15, 1938, in connection with the publication of ‘The Digest.’ In July, 1937, the defendants advised Bulkley that they would place Review in funds to enable it to finance the anticipated deficit and requested Bulkley to continue to sell and deliver paper to Review and to extend credit not to exceed ninety days for a temporary period so as to enable the defendants to have more time to consider in what manner to advance the necessary sums to Review. The defendants agreed that if Bulkley would continue to sell paper to Review and would agree to extend such credit, that defendants would advance to Review sufficient moneys for it to pay for said paper and to meet any deficit in its operations. Bulkley relied on those promises and agreed with defendants to continue to sell paper and to extend credit for the period and purpose requested. Despite the fact that Bulkey performed their portion of the agreement, the defendants failed and refused to advancee to Review sufficient moneys to meet its operating expenses and Review did not have sufficient funds to meet them. As a result there was an unpaid balance of a considerable sum due Bulkley by November, 1937. Thereafter the successor corporation to Review was adjudicated a bankrupt, due to defendants failure to advance sufficient funds to meet the budget of 1937, and in August, 1940, Bulkley received a first and final dividend in a relatively small amount. This Bulkley applied in reduction of their claim for paper delivered to Review during 1937. The difference is the sum for which suit is brought.

The italicized portions of the contract as outlined above show quite clearly that the defendants never promised to pay Bulkley any sum. Their promise was to put Review in funds to meet its obligations. The credit to Review was sought in order to enable defendants to have more time to consider in what manner to advance the necessary sums to Review. The debt was always to be that of Review and never that of defendants. The agreements of defendants was to answer for the debt of another. If Review had had enough money to pay its debt to Bulkley or had paid it, Bulkley would not have been interested in whether or not the anticipated deficit of Review was financed. The fact is that Bulkley did not look to defendants for payment until the final dividend in the bankruptcy proceeding had been received in 1940, Bulkley's own conduct indicated that they considered Review the primary obligor and the defendants secondary or collateral obligors.

The case of Richardson Press v. Albright, 224 N.Y. 497, 121 N.E. 362, 8 A.L.R. 1195, is squarely in point. There there was a promise by the defendant, a large stockholder of the publisher, to pay a printer in cash for each issue of a periodical. This court said by Pound, J. (page 500 of 224 N.Y.,page 363 of 121 N.E.): ‘This letter contains no promise to pay plaintiff the debt of Oceanic Publishing Company, but it contains a personal assurance that defendant will furnish Oceanic Publishing Company money to pay for each future issue’ and again, ‘It later appeared that the money was to be forwarded by defendant to Mr. Davidson, the treasurer of the Oceanic Company.’

A lengthy quotation from the Richardson Press case would carry this opinion to too great length but the following indicates how close the two cases are upon the facts: ‘But a promise may still be collateral, even though the new consideration moves to the promisor and is beneficial to him. The elements of beneficial interest and new consideration must be present to take the case out of the statute; but the inquiry remains whether the consideration is such that the promisor thereby comes under an independent duty of payment, irrespective of the liability of the principal debtor. White v. Rintoul, supra, 108 N.Y. (222), at page 227, 15 N.E. 318. The implied consideration, as indicated by the subsequent dealings of the parties, is that plaintiff will continue to give credit primarily to Oceanic Publishing Company. Plaintiff was notified on March, 14, 1912, that defendant admitted no responsibility as to its claim, and it is indisputable that plaintiff thereafter considered that the primary duty of payment remained with the original debtor. * * * And turned to defendant only when the resources of the original debtor had been completely exhausted. ...