Hurst Hardware Co. v. Goodman
| Decision Date | 20 December 1910 |
| Parties | HURST HARDWARE CO. v. GOODMAN. |
| Court | West Virginia Supreme Court |
Submitted January 19, 1910.
Syllabus by the Court.
If property be delivered or services rendered to one person upon an oral promise of payment by another, and charged only to the person to whom delivery was so made or for whom services were so rendered, and an effort made to collect the purchase money or compensation from the person against whom the charge was made, such promise is collateral, and, if not in writing void.
If the main purpose of an oral promise by one person to pay a sum of money for which another is liable or may become liable is to secure a direct, personal, and pecuniary benefit to the promisor, the promise is original, and not within the statute of frauds, though such third person remain liable for the debt.
If the benefit derived by the promisor in return for such a promise is remote, indirect and not personal, the promise is collateral and within the statute.
The oral promise of an officer and stockholder of a corporation who is liable as an indorser on its paper and for debts or obligations, assumed by the corporation, to pay for goods sold and delivered to it, is collateral and within the statute; the benefit accruing to him from such sale and delivery being remote and indirect.
Error from Circuit Court, Mingo County.
Action by the Hurst Hardware Company against A. Goodman. Judgment for defendant, and plaintiff brings error. Affirmed.
Stokes & Bronson and Sheppard, Goodykoontz & Scherr, for plaintiff in error.
Campbell Brown & Davis, for defendant in error.
Alleged error in the rulings of the trial court on a demurrer to evidence constitutes the ground of complaint on this writ. The Hurst Hardware Company instituted the action to recover a sum due it for merchandise sold and delivered to a corporation, known as the Goodman Coal & Coke Company amounting to $900.85, and also a sum due it, as assignee of the Williamson Grocery Company, for goods sold and delivered to the same corporation, on the theory that the defendant, A. Goodman, had bound himself by verbal promises to pay said debts, not within the statute of frauds.
The facts disclosed by the uncontradicted testimony are substantially as follows: The defendant and one Sampsell took a coal lease on a tract of land known as the Stepp land, providing for the payment of a heavy minimum annual royalty. The Goodman Coal & Coke Company was organized to develop the property and said lease assigned to it. Goodman was a heavy stockholder in that corporation and its president and treasurer. He was also obligated with others by indorsements for some of its debts. The plaintiff and its assignor had been furnishing it merchandise. As it failed to pay its bills promptly and seemed to be embarrassed, each of these companies declined to fill some of its orders for goods. Thereupon the defendant made to each of them the promises relied upon here as binding him personally. At that time the corporation owed the Williamson Grocery Company a considerable sum, which the defendant paid by a check of the corporation. He then talked to the manager of the grocery company who says he told him he would be personally responsible for the amounts to become due on all future purchases by the company. Thereafter it delivered or furnished the corporation goods to the amount of $1,542.50, charging them to it and rendering it statements for the same. At or about the same time the corporation was indebted to the hardware company to the extent of about $600. Its manager called upon the defendant, who promised to make a substantial payment on the old account, and ordered shipment of such goods to the corporation as should be thereafter needed or wanted, and promised to pay for them himself. Afterwards he sent the corporation's check for $100. Additional goods were furnished and charged to the corporation, until the balance due amounted to $900.85. Later the corporation went into the hands of a receiver, and then into bankruptcy, and both the Hurst Hardware Company and the Williamson Grocery Company filed their accounts against it in the bankruptcy proceeding, whence each received a portion of its debt.
If the situation of the defendant as an officer and stockholder of the corporation, indorser on its paper, and principal in the obligation for royalties, payment whereof was assumed by the corporation, did not make these debts for goods his own debts, founded upon consideration moving to him, and the promises original, the judgment is right. By charging the goods to the corporation and demanding payment thereof from it, the vendors disclosed manifest, positive, and unequivocal intent to hold it a debtor to them. In seeking now to hold Goodman also, they are attempting to make him pay the acknowledged debt of the corporation. In such cases the decisive test is to whom credit was given, and it must have been given to the promisor alone. If the creditor relies upon the person to whom the property is delivered or for whom the service is rendered to any extent whatever, the promise is collateral and void, if not in writing. Johnson v. Bank, 60 W.Va. 323, 55. S.E. 394; Mankin v. Jones, 63 W.Va. 373, 60 S.E. 248, 15 L.R.A. (N. S.) 214; 20 Cyc. 180, 181. Here the charging of the goods to the corporation, rendition of statements to it, and assertion of claims therefor against it in the bankruptcy proceeding, all admitted by the plaintiff, effectually preclude a finding in its favor. A verdict for it, on this theory of the case, could not be sustained.
The decision must turn, therefore, upon the inquiry as to the effect of the relation existing between Goodman and the Goodman Coal & Coke Company. If, in substance, effect, and main purpose the oral agreements were for his benefit, the promises were original, and not collateral undertakings. It is not enough merely to say he was benefited by them. In ordinary contract law a benefit to the promisor or detriment to the promisee constitutes a sufficient consideration. The question we are called upon to determine goes beyond this. How far the policy which dictated the statute of frauds, and the terms in which the legislative will is expressed, must have weight in the solution thereof. In almost every instance of the assumption of one man's debt by another there is some reason for the promise, some benefit accruing to the promisor as well as the debtor. The acknowledged and expressly declared purpose of the statute is to preclude the establishment of rights by oral testimony, when the situation of the parties is such as to constitute a strong motive for perjury and fraud in establishing a liability, or the false extension or amplification of conversations and transactions so as to make them impose obligations lying beyond their real scope and effect. To this end, it ordains and declares that no action shall lie to charge any person upon a promise to answer for the debt, default, or misdoings of another, unless the promise or some memorandum or note thereof be in writing signed by the party to be charged thereby or his agent. Tested by its letter, the statute inhibits proof of an oral promise to pay the debt of a third person. That some benefit accrues to the promisor for the service rendered, or the property sold and delivered, to such third person, does not necessarily make the debt that of the promisor or prevent it from being that of such third person. If the debt is that of another and not of the promisor, the terms of the statute include it, and an incidental benefit accruing to the promisor cannot exclude it. If, on the other hand, the debt is that of the promisor, the promise is not within the statute, though a third person may be incidentally relieved of an obligation in consequence of payment. If, for a consideration, the promisor has assumed the debt of another and made it his own, the promise lies beyond the terms and policy of the statute. Neither its terms nor policy relate exclusively to the subject of benefit or detriment. The subject-matter is the mode of proof of the assumption by one man of another's debt. Therefore, whether the debt is that of another is the true test.
This question has been the subject of much discussion and somewhat varied judicial rulings. A divergence of opinion respecting it between Chief Justice Shaw, of Massachusetts, and Chancellor Kent, of New York, became manifest many years ago. In some states the views of one are adopted and in some the views of the other. New York has receded from the position taken by Chancelor Kent, and substantially adopted that of...
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