Lams v. The F. H. Smith Company

• Citation: 36 Del. 477,178 A. 651
• Court: Superior Court of Delaware
• Decision Date: 13 March 1935
• Parties: EMILE LAMS and MARY LAMS, his wife, v. THE F. H. SMITH COMPANY, a corporation of the State of Delaware

178 A. 651

36 Del. 477

EMILE LAMS and MARY LAMS, his wife, v. THE F. H. SMITH COMPANY, a corporation of the State of Delaware

Superior Court of Delaware, New Castle County

March 13, 1935

Superior Court for New Castle County, No. 71, May Term, 1934.

The declaration alleged that the plaintiffs purchased from the defendant bonds of another corporation having a par value of $ 2500; that the defendant at the time of the said purchase represented that it would, after the lapse of a three-year period, arrange for the re-purchase or re-sale of the securities at the option of the plaintiffs; that such agreement to re-purchase was in form of a letter, a copy of which was attached to the declaration and in part was as follows:

"In consideration of your purchase of $ 2500. 7% Collateral Trust Sinking Fund Coupon Gold Bonds, issued by Properties Investment Corpn., of Washington, D. C., dated December 10 1928, we will at your option, on or after December 10, 1931 arrange for the repurchase or resale of these securities at par and accrued interest. Should you desire after that date to retain the securities, you may do so without interruption."

This letter was signed by the name of the defendant by "William R. Baum, Manager." The declaration further alleged that the contract and purchase were made in New York and recited the statute of New York (Personal Property Law [Consol. Laws, c. 41], Art. 3, § 31), which made void an agreement not to be performed within one year, unless the agreement or some note or memorandum thereof be in writing and subscribed by the party to be charged therewith or by his lawful agent; the declaration then alleged that the words "or his lawful agent" had been construed and held by the Courts of New York to mean that the authority of the agent need not be in writing but such authority might be shown by parol.

To this declaration the defendant filed a number of pleas and by the 5th, 6th, 7th and 8th alleged that the agreement was not in conformity with the Delaware Statute of Frauds, being Section 2626 of the Revised Code of 1915, which provided:

"No action shall be brought whereby to charge any person * * * upon any agreement that is not to be performed within the space of one year from the making thereof * * * unless the same shall be reduced to writing, or some memorandum, or note thereof, shall be signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized in writing. * * *"

To the 5th, 6th, 7th and 8th pleas the plaintiff demurred upon the ground that as the agreement and transaction were executed in the State of New York and the Statutes of that state pleaded that, therefore, the law of the State of New York and not the Statute of Frauds of Delaware was the applicable law in the case.

The demurrer is sustained.

C Stewart Lynch (of Biggs, Biggs and Lynch) for plaintiff.

Josiah Marvel, Jr. (of Marvel, Morford, Ward and Logan) for defendant.

LAYTON C. J., and RODNEY, J., sitting.

OPINION

RODNEY, J.

The pleas of the defendant having set up the Delaware Statute of Frauds and the plaintiffs' demurrer having been directed thereto, the question presented is whether the Delaware law (the law of the forum) shall be applied in the case. The answer to this question involves the construction of the nature and character of the Delaware Act. The question is whether, on the one hand, the Act is procedural in nature, having to do with the remedy, or, more properly speaking, the process of machinery by which rights under the contract are litigated or whether, on the other hand, the Act is to be construed as affecting the substance, the formalities or the enforceable validity of the contract itself, as a contract.

The cited Delaware Act is almost the counterpart of the English Act. The leading case adopting the view of the procedural nature of the Statute was Leroux v. Brown [1852], 12 C. B. 801, 138 E. R. 1119. As pointed out in Emerson v. Universal Products Co., 6 W. W. Harr. (36 Del.) 543, 162 A. 779, however, the Delaware Act was adopted in 1752, exactly one hundred years before the decision of Leroux v. Brown, and that case is, therefore, entitled to the greatest respect but is in no sense binding on this Court.

In Leroux v. Brown, supra, an oral agreement, not to be performed within a year, had been entered into in France and was enforceable there. Suit was brought upon the contract in England and it was held that Section 4 of the Statute of Frauds applied to the procedure and that the suit could not be maintained unless the contract was in writing in conformity with the English Law. A distinction was drawn between the words of the 4th Section, "no action shall be brought," and those of the 17th Section, "no contract shall be allowed to be good." This distinction has not generally been approved either in England or America and in England the wording of the 17th Section was changed by the "Sale of Goods Act" (1893), so as to read "shall not be enforceable by action" so as to make the two Sections conform. In construing the Delaware Act we are not confronted with any variation or distinction between the language of the two Sections originally known as Section 4 and Section 17. Section 17 was not adopted in Delaware (Alderdice v. Truss, 7 Del. 268, 2 Houst. 268) until its new language, as found in the English "Sale of Goods Act," was incorporated in our Law in 1933 by the approval of the Uniform Sales Law, Vol. 38, Laws of Delaware, c. 158, p. 570, § 2644-F. It would seem that both Sections of our Law must, therefore, relate to the substance or formalities of the contract or both must simply relate to and exclude the remedy.

Leroux v. Brown has not been reversed and still represents the law as it exists in England, but this result has not been continued without dissent for Willes, J., in Williams v. Wheeler [1860], 8 C. B. (N. S.) 299, 141 E. R. 1181, stated he "was not satisfied that either of the Sections to which reference has been made, warrants the decision." See, also, Gibson v. Holland, 1 L. R. C. P. 1.

Most of the American decisions discussing the nature and character of the Statute of Frauds, and especially in connection with the conflict of laws, may generally be divided into three groups:

(1) those that adopt the distinction laid down in Leroux v. Brown and hold the Statute remedial or procedural;

(2) those that repudiate the distinction yet still hold the Statute remedial; and

(3) those that repudiate the distinction and hold the Statute is substantive.

In the first group may be found cases like Kleeman v. Collins, 72 Ky. 460, 9 Bush (Ky.) 460; Downer v. Chesebrough, 36 Conn. 39, 4 Am. Rep. 29; Boone v. Coe, 153 Ky. 233, 154 S.W. 900, 51 L.R.A. (N. S.) 907; Third National Bank v. Steel, 129 Mich. 434, 88 N.W. 1050, 64 L.R.A. 119. These cases are not greatly persuasive, for it is uncertain what measure of reliance is placed upon the distinction (with which we are not here concerned) and which distinction, even in England, seems not now to be entirely endorsed. See Morris v. Baron & Co., L. R. 1918 A. C. 1. Wharton on Conflict of Laws, which treats at length of the distinction in Leroux v. Brown, says that (§ 690-f):

"In view of the anomalous results that follow from a strict application of the distinction made in Leroux v. Brown and the tendency, already noted, to repudiate that distinction, the better view is to regard a provision of the Statute of Frauds as substantive rather than remedial."

In the second group may be found Heaton v. Eldridge & Higgins, 56 Ohio St. 87, 46 N.E. 638, 36 L.R.A. 817, 60 Am. St. Rep. 737, and, possibly, Buhl v. Stephens (C. C.), 84 F. 922, and Straesser-Arnold Co. v. Franklin Sugar Refining Co. (C. C. A.), 8 F (2d) 601. It may be worthy of remark that Leroux v. Brown found it necessary to discover the distinction between the two sections in order to find Section 4 procedural and it may not be entirely clear what that decision would have been without the distinction. Wharton on the Conflict of Laws, § 690-c, says that most of the cases that repudiate or ignore the distinction hold the Statute to be substantive and, says Wharton, "this position seems to be the correct one if the distinction is to be repudiated."

In the third group holding that the Statute of Frauds should be construed as substantive and not procedural are many well reasoned cases supported by articles by leading educators. Halloran v. Jacob Schmidt Brewing Co., 137 Minn. 141, 162 N.W. 1082, L.R.A. 1917E, 777; Cochran v. Ward, 5 Ind. App. 89, 29 N.E. 795, 31 N.E. 581, 51 Am. St. Rep. 229; Matson v. Bauman, 139 Minn. 296, 166 N.W. 343; Miller v. Wilson, 146 Ill. 523, 34 N.E. 1111, 37 Am. St. Rep. 186; Goodrich, Conflict of Laws, § 88; Restatement, Conflict of Laws, § 334, "Statute of Frauds and the Conflict of Laws," 32 Yale Law Journal 311. See, also, as to Pennsylvania Act (33 PS, § 1, et seq.), being substantive, Franklin Sugar Co. v. Martin-Nelly Co., 94 W.Va. 504, 119 S.E. 473; Franklin Sugar Refining Co. v. Holstein Harvey's Sons (D. C.), 275 F. 622; Franklin Sugar Co. v. William D. Mullen Co. (D. C.), 7 F. (2d) 470.

Some Courts in holding their Statute as procedural and as merely affecting the remedy have seized upon the title of the original English Act (1677), "An Act for Prevention of Frauds and Perjuryes," and of the language of Section 4 "no action shall be brought," as indicative of a legislative intent to limit the opportunities of perjury by preventing the introduction of oral testimony when the circumstances of the transaction had become dimmed by lapse of time or other circumstances require a written memorandum. While this is, of course, true, yet the Statute may have a deeper significance, viz.: that...