H. B. Owen Tie Co. v. Bank of Woodland

• Decision Date: 16 June 1924
• Docket Number: 24087
• Citation: 136 Miss. 114,101 So. 292
• Court: Mississippi Supreme Court
• Parties: H. B. OWEN TIE CO. v. BANK OF WOODLAND. [*]

101 So. 292

136 Miss. 114

H. B. OWEN TIE CO. v. BANK OF WOODLAND. ^[*]

No. 24087

Supreme Court of Mississippi

June 16, 1924

Division B

CONTRACTS. Agreement to pay sum due another to third person must be supported by consideration; forbearance without agreement to forbear, no consideration.

An agreement to pay a sum due to another to a third person made after the completion of the first contract must have a consideration to make it binding, as it is a collateral contract, and where there was neither an agreement to forbear to sue on the original contract, nor a release of the original debtor, nor a novation of the contract, the mere fact that the promisee does forbear is insufficient. The agreement must be to forbear and must be binding upon the promisee.

HON GUY MITCHELL, Special Judge.

APPEAL from circuit court of Chickasaw county, HON. GUY MITCHELL Special Judge.

Suit by Bank of Woodland against the H. B. Owen Tie Company. From a judgment for plaintiff, defendant appeals. Reversed and cause dismissed.

Judgment reversed and cause dismissed.

Mitchell & Mitchell, for appellant.

The appellant is attempted to be held liable to appellee solely on the letter written by appellant on December 18, 1920. It is the theory of appellee as stated in his declaration and as contended on the trial of the cause that appellant by reason of this letter became a surety to the bank on the notes of Simpson to the amount of eighteen thousand dollars. This was a collateral undertaking on the part of appellant, and therefore could furnish no basis for any liability without a consideration to support it. Clopton v. Hall, 51 Miss. 482.

In the instant case the appellee relies upon the naked promise of appellant as contained in the letter on which the suit is predicated. It will be noted that appellee did not offer a single word of proof to show what consideration induced appellant to write the letter in question. No explanation whatever, is given as to why the bank should write a letter to appellant and ask for information as to when appellant would pay for Simpson's ties. It is not shown by any testimony that appellant and appellee had any kind of agreement, express or implied, that would constitute any consideration for the promise contained in the letter. It is not shown that any kind of advantage or benefit resulted to appellant nor anything of prejudice to appellee.

The most that call be said is that appellee forbore taking any steps to enforce the collection of the debt from Simpson. But mere forbearance without an agreement to that is not a sufficient consideration, and it can make no difference that the act of forbearance was induced by the promise. 13 C. J. 348, sec. 200 (d), and authorities there cited. 6 R. C. L. 660.

This letter, standing alone, with no explanation of the circumstances, and no reasons given for it being written except the mere request of appellee for the information, cannot create any legal liability upon the part of appellant to pay the debt owing by Simpson to the bank It appears that this is decisive of the whole matter and upon this theory the case should be reversed and judgment given in this court for appellant. Richardson Bros. Co. v. Fields, 26 So. 981; Ineal & Co. v. Peterson, 19 L. R. A. (N. S.) 842; Bank of Carrollton v. Latting, 44 L. R. A. (N. S.) 481.

Rush H. Knox and F. S. Harmon, for appellee.

The promise of the Tie Company to Pay the Bank is Supported by Valid Consideration and is Therefore Enforceable. Contracts are of two kinds, bi-lateral and uni-lateral. In a bilateral contract a promise is given in exchange for a promise and each is consideration for the other. In a unilateral contract there is a promise on one side for which the performance of the act on the other side forms a consideration. The contract in this case belongs to the latter class. Here the tie company promised to pay the bank the eighteen thousand dollars which Simpson owed the bank. As a consideration for this promise, the bank forbore to sue Simpson on the notes past due and unpaid. The bank forbore to sell the ties upon which it held a lien. Forbearance to act may serve equally well as affirmative action as consideration for a promise.

Furthermore there was in this forbearance a benefit to the tie company in that it was able to go ahead under its contract with Simpson and market several thousand ties and make a profit thereon. There was likewise a detriment resulting to the bank from its forbearance to sue. By this forbearance to sue it refrained from exercising a legal right; it refrained from seizing the ties pledged as collateral security. There was then a benefit on one side and a detriment on the other. A forbearance to sue thus working a detriment to the bank was a valid consideration to support a promise of the tie company to pay Simpson's debt. 13 C. J. 348, section 200.

Attention of the court is called to the learned note in 19 L. R. A. (N. S.) at the bottom of page 842 which elaborately discusses three lines of decision apparently in conflict but really distinguishable upon careful examination. Appellant relies upon one group of these decisions, we rely upon another, and insist not only that our cases are better reasoned, but feel confident that the court will find that the facts of the case at bar bring it within the rule of the cases herein cited.

One line of authority holds that there must be a mutual promise of forbearance. This overlooks entirely the distinction between unilateral and bilateral contracts which Mr. Williston, the leading authority on contracts in America today, points out in his valuable treatise. See 1 Williston on Contracts, sec. 135.

The second line of cases, under the rule of which the facts of this case bring it, holds that an agreement to forbear may be implied from a promise to pay and other circumstances, followed by actual forbearance in reliance thereon. The third line of authorities holds that a request to forbear expressed or implied followed by forbearance in compliance therewith may furnish a good consideration for a promise to pay.

"In some jurisdictions apparently very slight circumstances, together with actual forbearance are sufficient to at least make a prima-facie case of agreement to forbear . . ." Webbe v. Stone, 58 Ill.App. 222. The mere fact that it did forbear is prima-facie evidence of such an agreement. See Watters v. White, 52 A. 401; Sellers v. Jones, 175 S.W. 553; Boyd v. Freize, 5 Gray (Mass.) 553; Saunders v. Bank, 71 S.E. 714 at 717.

Again in Edgerton v. Weaver, 105 Ill. 43, it is said that, "whether actual forbearance, following a promise to pay interest upon interest for forbearance, is evidence of an acceptance of the promise, is a question of fact." The trial judge in the case at bar did so find as a question of fact from circumstantial evidence and in the light of this decision this court should uphold his findings.

Attention is also called to the following cases discussed on page 846 of the case noted above cited, supporting fully the contentions of the appellee. McMicken v. Stafford, 197 Ill. 540; Breed v. Freize, 5 Gray 554; Armstrong v. Snyder, 15 Texas Civ. App. 394, 39 S.W. 379; Lansing Bank v. Coleman, 117 Mich. 177, 5 N.W. 624.

Thos. E. Pegram, also for appellee.

The rule that there must be a promise to forbear as well as actual forbearance to make sufficient consideration to support an action against a third person promisor has a well-recognized exception, which exception is just as much the law as the rule itself. The exception is when actual forbearance is granted on the request of the promisor. The true rule in cases like the instant one is stated in 6 R. C. L. 660.

"The rule seems to be that actual forbearance is not a consideration for a previous promise by a third person to pay a debt unless the promisor expressly or impliedly requested the forbearance."

"Where there is a request to forbear, there ought to be no doubt that forbearance to sue on enforceable contract or extension of time for the payment thereof is a sufficient consideration for a promise." See numerous cases cited in footnotes 18 and 20 in support of above text.

Mitchell & Mitchell, for appellant in reply.

The well-reasoned case of Queal & Company v. Peterson, 19 L. R. A. (N. S.) 842, cited in original brief filed by our associates in this case, sustains our position absolutely. "Actual forbearance to sue is not a sufficient consideration to support a transfer of a negotiable instrument to secure the original debt, unless there was a valid promise to forbear for some specific time, so that for such time the right of action was...