James D. Swoish, Inc. v. Panda Foods, Inc., 7819

• Decision Date: 27 January 1982
• Docket Number: No. 7819,7819
• Citation: 2 Haw.App. 679,639 P.2d 426
• Parties: JAMES D. SWOISH, INC., a Hawaii corporation, Plaintiff-Appellant, v. PANDA FOODS, INC., a Hawaii corporation, Defendant, and Thomas Wong, individually, Defendant-Appellee.
• Court: Hawaii Court of Appeals

Page 426

639 P.2d 426

2 Haw.App. 679

JAMES D. SWOISH, INC., a Hawaii corporation, Plaintiff-Appellant, v. PANDA FOODS, INC., a Hawaii corporation, Defendant and Thomas Wong, individually, Defendant-Appellee.

No. 7819.

Intermediate Court of Appeals of Hawai'i.

Jan. 27, 1982.

Syllabus by the Court

1. An oral promise to pay another's debt is barred by the statute of frauds if it is a "collateral" promise, but it may not be barred if it is an "original" promise.

2. Enforcement of a guarantor's oral personal guaranty of payment by a corporation for inventory goods to be supplied to the corporation by the promisee on a thirty-day credit basis is not barred by the statute of frauds if the guarantor's primary object in making the guaranty was to secure direct and personal benefits to himself from the promisee's performance.

3. The question whether a guarantor's primary object in making his guaranty was to secure direct and personal benefits to himself from the promisee's performance is a question of fact to be decided by the trier of fact.

Michael D. Smith, Honolulu (Carroll & Smith, Honolulu, of counsel), for plaintiff-appellant.

Henry N. Kitamura, Honolulu (Yukio Naito, Shim, Sigal, Tam & Naito, Honolulu, of counsel), for defendant-appellee.

Before HAYASHI, C. J., and PADGETT and BURNS, JJ.

PER CURIAM.

Plaintiff-Appellant James D. Swoish, Inc. (plaintiff), appeals the summary judgment entered in favor of defendant-appellee Thomas Wong (Wong). ¹ We reverse.

Viewed in the light most favorable to plaintiff, the facts are as follows:

Wong is an officer (secretary-treasurer), director, and stockholder (19,495 of 74,800 shares) of Panda Foods, Inc. (Panda). He co-signed Panda's ten-year lease of 10,000 square feet of warehouse space.

In early 1974 Panda entered into the business of growing and selling bean sprouts but found it to be unprofitable. In an attempt to "save the company," Panda decided to sell produce. Wong induced plaintiff to supply Panda with produce on a thirty-day credit basis by verbally and personally guarantying payment by Panda. ²

Between March 1976 and March 1978, via invoices addressed to "Panda Foods, Inc.," plaintiff delivered to Panda fresh fruit and vegetables. Panda became delinquent in its payments and accumulated a balance due of $26,116.39. Plaintiff allowed Panda to accumulate the deficit because of Wong's personal guaranty. When Panda did not pay, plaintiff sued Panda and Wong. Plaintiff obtained judgment against Panda and thereafter has been able to collect only $9,300.00 from it. Wong's defense is based on Hawaii's statute of frauds, Hawaii Revised Statutes chapter 656, which provides in relevant part as follows:

§ 656-1 Certain contracts, when actionable. No action shall be brought and maintained in any of the following cases:

(2) To charge any person upon any special promise to answer for the debt, default, or misdoings of another;

Plaintiff claims to fall within an exception noted in Castle v. Smith, 17 Haw. 32 (1905): "If the defendant's promise is original or absolute or primary or independent, as it is variously expressed, and not merely collateral to the obligation of the original debtor, it is not within the statute." Id. at 37.

An original promise is generally held to be one in which the primary object of the promisor is to subserve or promote some personal interest of his own rather than to become a surety or guarantor for another. * * *

As applied to...