City of Highland Park (Highland Park General Hospital) v. Grant-Mackenzie Co.

• Citation: 115 N.W.2d 270,366 Mich. 430
• Decision Date: 17 May 1962
• Docket Number: No. 63,GRANT-M,63
• Parties: CITY OF HIGHLAND PARK (HIGHLAND PARK GENERAL HOSPITAL), a Michigan municipal corporation, Plaintiff and Appellee, v.acKENZIE COMPANY, a Michigan corporation, Defendant and Appellant.
• Court: Supreme Court of Michigan

Page 270

115 N.W.2d 270

366 Mich. 430

CITY OF HIGHLAND PARK (HIGHLAND PARK GENERAL HOSPITAL), a Michigan municipal corporation, Plaintiff and Appellee, v. GRANT-MacKENZIE COMPANY, a Michigan corporation, Defendant and Appellant.

No. 63.

Supreme Court of Michigan.

May 17, 1962.

Albert L. Lieberman, Detroit, Martin M. Miller, Detroit, on the brief, for defendant and appellant.

Colin J. McRae, City Atty., George W. Moore, Asst. City Atty., Highland Park, for plaintiff and appellee.

Before the Entire Bench.

SMITH, Justice.

This case presents a statute of frauds question as to whether or not certain statements made by an employer to a hospital, concerning care of an employee, constitute a promise within the statute of frauds.

Plaintiff and appellee filed its declaration setting forth the following allegations: That one, Sam Chernick, who was a valuable employee of defendant Grant-MacKenzie Company, was admitted to the hospital on July 31st, 1957, and that he was given hospital care and thereafter discharged; that on two subsequent occasions he was readmitted to the hospital and discharged. It was further alleged that after each stay in the hospital the cost of care exceeded the patient's insurance benefits. The declaration stated further that after the first two periods of hospitalization the defendant company paid the balance due on each bill after the insurance benefits had first been exhausted. This was done allegedly in accordance with an agreement between plaintiff and defendant because it was of pecuniary value to the defendant to have the defendant's employee, Chernick, treated and returned to his work as quickly as possible.

The third and final time that Chernick was hospitalized the defendant refused to pay as before whereupon plaintiff brought suit, claiming judgment in the sum of $1977.15 with interest, costs and attorney fees.

In its answer, the defendant admitted that Chernick was an employee on the first two occasions when he was hospitalized, and further that it had in fact paid the sums as alleged, but it denied that payments were made in accordance with any agreements. It denied that Chernick was an employee at the time of the third admission. The defendant also pleaded as an affirmative defense that the plaintiff's claim is void under the statute of frauds.

At the trial, an employee, Simpson, of the plaintiff-hospital testified as to the three periods of hospitalization of Chernick. Simpson then testified that a conversation took place between himself and an officer of the defendant company on january 23, 1958, which was one day after Chernick was admitted to the hospital for the third time. The testimony tended to show that there was a discussion by telephone of the insurance coverage left to cover the cost of Chernick's hospitalization. Simpson said that he asked the officer of the defendant corporation whom to look to for payment of the balance after Chernick's benefits were exhausted. He stated that the answer given to him was 'What are you afraid of, we paid your other bills and are taking care of them. You send us the bill for this one and we will see that you get paid.'

Plaintiff's exhibit 1, which was admitted without objection, was a hospital record card which contained a number of items of information, including the notation 'Responsible Party, Insurance.' The exhibit also showed certain payments, which were explained to be in part from the insurance company carrying Chernick's hospitalization, part in cash, and a third part from checks endorsed by Chernick and turned over to the hospital.

At the close of plaintiff's proofs, the defendant made a motion for a judgment of no cause of action on the grounds that the method employed in collecting the hospital bill indicated that Chernick was the party whom the plaintiff considered to be primarily liable, and that, at best, what the plaintiff had obtained from the defendant was a collateral promise not in writing. The court withheld decision on the motion and ordered that proofs be taken from the defendant.

An officer of the defendant company then testified that he had no conversation with plaintiff's employee on January 23rd, 1958, as alleged. He stated that a conversation was held by phone in April of that year. He further testified that Chernick had worked for the company about six years and for a predecessor company a number of years. He stated that Chernick had last worked for the company in December 1957, and that Chernick simply ceased to be able to work any longer. It was admitted by the defendant's officer that at or about the time of Chernick's first stay in the hospital, he had indicated to the hospital that it would be paid as it had been paid before. He says, however, that the prior transaction referred to involved another employee and not Chernick.

After the defendant rested its case, plaintiff recalled it employee, Simpson, for rebuttal. Over defendant's objection, plaintiff's exhibit 2 was admitted. Among other things, it contained a notation made by Simpson as follows: '1/23 Mr. Grant will pay bal.' This, the witness said, indicated a conversation in which the defendant's officer, Grant, agreed to pay the balance on Chernick's bill.

The trial judge held that a conversation did take place as the plaintiff claimed and that the defendant's officer did say, 'You send us the bill for the one and we will see that you get paid.' The court also found that considering the relationship of Chernick to the defendant, that the statement made by the defendant to the plaintiff showed that it was an independent promise original in its nature and therefore not within the statute of frauds. The trial judge also found that Chernick was still an employee of the defendant company, and that there was adequate legal consideration for the defendant's promise flowing from the employer-employee relationship, the anticipation of Chernick's future services as well as his past services, and that this no doubt was the reason as well as the consideration for defendant's promise made to plaintiff.

The appellant company contends that the promise made by its officer was within the statute of frauds since it was an oral collateral promise to answer for the debt of another person and was without consideration. The appellant argues that hospital records show that plaintiff was looking to Chernick's insurance for primary satisfaction of its debt; further, that the taking of checks to the sickbed of Chernick, where they were endorsed over to the hospital, proved appellee's intention to hold Chernick primarily liable. The appellant cites several cases for the principle that the consideration received by a promisor sufficient to take a promise out of the statute of frauds must be in the nature of a benefit which he did not before enjoy and which accrued immediately to the promisor. Appellant argues that the trial court's finding that consideration flowed from the employer-employee relationship and in anticipation of Chernick's future services was wholly without basis.

The appellee hospital contends 'that the corporation conceivably contemplated that Chernick would return to its employ as he had on two previous occasions.' It argues that had not the hospital obtained the assurance from Chernick's employer to pay the amount in excess of insurance coverage that it would have transferred Chernick to a Detroit hospital inasmuch as he was a Detroit resident. Appellee urges that this Court does not reverse a trial judge unless the evidence clearly preponderates in the opposite direction. It argues that there was sufficient evidence, although in dispute, upon which the trial judge could make his findings.

It is elementary that under the statute of frauds every special promise to answer for the debt, default, or misdoings of another person is void unless the promise or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some other person lawfully authorized. C.L.1948, § 566.132 (Stat.Ann. § 26.922). This particular segment of the statute has remained virtually unchanged since its original adoption. There are, then, a large number of cases interpreting this section of the statute. Great inconsistency has arisen over whether or not a promise is original or collateral. ¹

The trial judge was certainly correct in his opinion that:

'Frequently distinctions have been made by Courts on the basis of whether the promise made is an original or a collateral promise, the latter falling within the Statute of Frauds and the former without, but while this is a convenient expression for distinguishing cases within and without, it really isn't very helpful * * *.'

It is not difficult to agree with Professor Corbin that 'If the terms are of any service, they can be so only as terms descriptive of a result arrived at on grounds quite independent of the terms themselves. They could be restricted so as to mean by 'original' that the promise is for any reason not within the guaranty clause of the statute, and by 'collateral' that it is within that clause.' ²

Chief Justice Cooley in Calkins v. Chandler, 36 Mich. 320, 323, wrote that 'In many cases the test whether a promise is or is not within the statute of frauds is to be found in the fact that the original debtor does or does not remain liable on his undertaking: if he is discharged by a new arrangement made on sufficient consideration, with a third party, this third party may be held on his promise though not in writing; but if the original debtor remains liable and the promise of the third party is only collateral to his, it will in strictness be nothing more than a promise to answer for the other's debt.' This comment of Chief Justice Cooley reflects only one of a number of tests used in determining whether or not a promise is within or without the statute of frauds.

Another oft-quoted Michigan case is Larson v. Jensen, 53 Mich. 427, 19 N.W. 130. In the Larso...