Nugent v. Wolfe

• Decision Date: 01 February 1886
• Parties: Nugent v. Wolfe
• Court: Pennsylvania Supreme Court

4 A. 15

111 Pa. 471

Nugent v. Wolfe

Supreme Court of Pennsylvania

February 1, 1886

Aruged January 11, 1886.

Error to the Court of Common Pleas, No. 1, of Philadelphia county Of January Term, 1885, No. 193.

Assumpsit by James Nugent against Frank Wolfe, brought 5th of October 1882, upon a parol promise by Wolfe to Nugent, that if he Nugent, would go security for stay of execution for another he, the said Wolfe, would indemnify and save him harmless from any loss or liability, and from paying anything by reason of his so going security.

On the trial before Biddle, J., the following facts appeared:

On the 22d of January, 1876, the Second National Bank of Ravena, Ohio, obtained a judgment against John Power and Martin Power, trading as John Power & Co., for $ 1,377.73, in the United States Circuit Court. James Nugent went security for John Power & Co. for stay of execution upon said payment.

Plaintiff offered to show, he himself being the witness, that in the early part of February, a. d. 1876, Frank Wolfe, the defendant, came to him and requested him to go security for stay of execution upon judgment obtained in the United States Circuit Court, by the Second National Bank of Ravena, Ohio, against John Power and Martin Power, trading as John Power & Co., for $ 1,377.73; the said Wolfe promising, undertaking and agreeing with the said Nugent, that in consideration of his, the said Nugent's going the security as aforesaid, he, the said Wolfe, would indemnify and save the said Nugent harmless from any loss or liability, and from paying anything by reason of his so going security. That he, the said Nugent, relying upon the said promise and undertaking of the said Wolfe, and in consideration of the same, agreed to go the security as aforesaid. Objected to. Objection sustained. Exception for plaintiff. (First assignment of error.)

It is admitted that Nugent did go the security for stay of execution as aforesaid; was sued upon the bond executed by him as security at its maturity, and was obliged to pay the amount of the judgment obtained again him, $ 1,499.74, and that the said Wolfe, though often requested, has not paid any portion of the said sum so paid by the said Nugent upon judgment obtained against him upon said bond.

The plaintiff closed his testimony. On motion of defendant's attorney the court granted a nonsuit, which the court in banc refused to take off.

The case had formerly been tried and a verdict had been rendered for the plaintiff for $ 1,930.30. A rule for a new trial had been granted. Biddle, J., in making the rule absolute, delivered the following opinion March 22d, 1884. It is here given as a very valuable review of the law on the important question in this case:

The question is squarely presented, whether a promise by one person to indemnify another, in consideration of the latter's incurring a liability as security for a third, is valid under the first section of the Act of April 26th, 1855, P. L., 308, unless reduced to writing. The statute is copied from the Act of 29 Charles II., cap. 3, a. d. 1676, and is apparently in force in most, if not all, of our states. The clause in question is, that no action shall be brought "whereby to charge the defendant upon any special promise to answer for the debt or default of another, unless the agreement upon which such action shall be brought, or some memorandum thereof, shall be reduced to writing, and signed by the party to be charged therewith, or some person by him authorized." The statutes being practically identical, the authorities, both English and American, are pertinent to its consideration; but unfortunately they are so numerous and conflicting that it is impossible to deduce any general principle from them. As was said by Judge Strong, in Maule v. Bucknell, 14 Wright, 51, "upon no subject, perhaps, has there been more diversity of judicial decision." The truth is, it was for very many years a subject of dispute whether the statute did not promote more fraud than it prevented, and as one or other of these views was in the ascendant, the law was construed liberally or strictly. Lord Eldon, in Cooth v. Jackson, 6 Vesey, 37, says: "I feel all the disinclination which has been lately expressed, and strongly expressed, in many cases, to carry on what may be called the struggles of courts of justice to take cases out of the reach of the statute, further than they have been carried."

Fortunately, in Pennsylvania this particular section, the 4th of Charles II. was not adopted until 1855, one hundred and seventy-nine years after it had been in practical operation, and only when our people had become satisfied of its utility. Our rulings, therefore, have been at least uniform. The particular question, however, involved in this case has never been authoritatively decided in this state.

In Wm. Saunders, 211, note e, it is said, "the question whether each particular case comes within the clause of the statute or not depends not on the consideration of the promise, but on the fact of the original party remaining liable, coupled with the absence of any liability on the part of the defendant or his property, except such as arises from his express promise." This is undoubtedly the construction of the statute in Pennsylvania: See Maule v. Bucknell, 14 Wright, 52; Townsend v. Long, 27 P. F. S., 143; Shoemaker v. King, 4 Wright, 107. The reasoning, therefore, by which a contract such as this is held to be within the statute is, that as soon as the surety signs the bond, the legal implication arises that if he is obliged to pay it, the principal will be bound to pay him. The principal being bound to reimburse the surety, the engagement of the party who has promised to indemnify the surety is collateral to that obligation, and is simply an engagement that if the principal does not repay the surety, he will do so. This, it is contended, is clearly a promise to pay the debt of another.

The view of those who hold that this case is not within the statute is by no means so easily stated or so clear. The latest English case (Wildes v. Dudlow, L. R., 19 Eq., 199, Malins, V. C.), declares that the point is plain upon principle, but states no principle and gives no reason. Mr. Brown, in the last edition (1880) of his work on the Statute of Frauds, says that the American decisions have resulted "in the rejection by the great preponderance of authority of the doctrine of Green v. Cresswell, and the adoption of Thomas v. Cook -- a result reached after much vacillation on the part of courts of the same state, and not, it must be confessed, by reference to any satisfactory ground of principle. Indeed, most of the decisions which reject the doctrine of Green v. Creswell waive altogether the question of principle, and put it as a matter settled by authority that the promise to indemnify "is not within the statute."

The semblance of principle which seems to be most plausible, and is here contended for, is, that while the implied obligation of the principal to repay his surety does exist, yet it is a mere incident of the special contract existing between the surety and his guarantor; that the statute applies only to obligations which exist or may exist, whether any contract may be made by the surety and his guarantor or not; that in this case Wolfe did not promise to be answerable for the debt of Powers & Co. to Nugent, for Powers & Co. owed no debt to Nugent. They became indebted to him long after the promise of Wolfe was made, and the state of affairs was to be taken of the date of the promise. "On this ground," says Mr. Brown (p. 186), "it is believed that the doctrine that the statute does not apply to promises to indemnify may rest; at least none so satisfactory or so consistent with the spirit of the statute is suggested in any of the cases." "But the principal's liability to the surety, and the indemnifier's liability, must relate to the same point of time -- the moment when the surety signs the bond -- are based on the same consideration, the obligation incurred, and are contingent on the same event -- the principal's default:" 2 Tenn. Ch. Rep., 452.

It can make no difference whether the principal, Powers & Co., is already indebted to Nugent, or whether he will become so indebted on Nugent going security. In either case the liability assumed by Nugent is only that Powers & Co. shall discharge their own debt in a twelvemonth, and Powers & Co. are bound in law to indemnify him if they do not. It is therefore evident that the promise to Nugent is only collateral to the legal liability of the principal to indemnify his own surety. And the defendant here is really in the position of surety that Powers & Co. will indemnify Nugent. How does this differ in principle from the very common case of a defendant promising the vendor to see him harmless for any credit that he might hereafter give to a vendee,

There is no debt due at the time of the promise, and there can be no obligation till one is contracted, and the vendee has failed to pay it, and yet it cannot be doubted that this is a guarantee within the Statute of Frauds: Brown on Frauds, § 163. As was said in Easter v. White, 12 Ohio 230, "Whether we have respect to the language or the object, a reasonable effect can only be given to the statute by holding it to embrace every undertaking or promise to another, to be answerable to him upon any contingency or condition for the debt or damage done to or to become due from a third person to such promisee, and thereby becoming surety for such third person to the promisee."

View this case as you may, it is an attempt by a person who has bound himself by a duly executed instrument of writing to be responsible for another to relieve himself of the liability he has incurred by...