Reed v. Samuels

• Decision Date: 03 August 1926
• Citation: 249 P. 893,43 Idaho 55
• Parties: F. W. REED, E. V. BOUGHTON and WILLIAM STORY, JR., Appellants, v. H. F. SAMUELS, Respondent
• Court: Idaho Supreme Court

249 P. 893

43 Idaho 55

F. W. REED, E. V. BOUGHTON and WILLIAM STORY, JR., Appellants, v. H. F. SAMUELS, Respondent

Supreme Court of Idaho

August 3, 1926

STATUTE OF FRAUDS-CONDITIONAL PROMISE OF STOCKHOLDER TO PAY CORPORATE DEBT HELD NOT TO CREATE ORIGINAL OBLIGATION.

Promise of stockholder that, if creditor of corporation would accept certain amount less than his claims, stockholder would pay it, held not to create original obligation of promisor constituting exception to statute, under C. S., secs. 7977 subds. 2, 3, no consideration moving directly to him as an individual.

APPEAL from the District Court of the Eighth Judicial District, for Bonner County. Hon. Chas. L. Heitman, Judge.

Action for debt. Judgment for defendant. Affirmed.

Judgment affirmed, with costs to respondent.

John P Gray, W. C. McEachern and E. V. Boughton, for Appellants.

This action is predicated upon the proposition that the obligation of Samuels is an original obligation under subdivision 2 of C. S., sec. 7977, and also under the last provision contained in subd. 3 of said section. The promise is an original obligation because made upon a consideration beneficial to the promisor. (Emerson v. Slater, 22 How. 28, 16 L.Ed. 360; Davis v. Patrick, 141 U.S. 479, 12 S.Ct 58, 35 L.Ed. 826; Wills v. Cutler, 61 N.H. 405; Garroway v. Jennings, 189 Cal. 97, 207 P. 554; Fairchild v. Cartwright, 39 Cal.App. 118, 178 P. 333; Rice v. Hardwick, 17 N.M. 73, 124 P. 800; Williston on Contracts, secs. 462, 472, 473; Page on Contracts, secs. 1218-1249.)

Under subdivision 2 of C. S., sec. 7977, the promise is an original obligation where the creditor parts with value. (Emerson v. Slater, supra; Enterprise Trading Co. v. Bank of Crowell (Tex.), 167 S.W. 296; Leonard v. Vredenburg, 8 Johns. (N. Y.) 29, 5 Am. Dec. 317; Van Winkle v. King, 145 Ky. 691, 141 S.W. 46.)

E. W. Wheelan, for Respondent.

A promise to answer for the debt, default or miscarriage of another is invalid unless the same or some note or memorandum thereof be in writing and subscribed by the party charged, or by his agent. (C. S., sec. 7976.)

For a case to come within the exceptions of sec. 7977, it is necessary that the oral agreement of promisor be supported by a new and original consideration between the newly contracting parties. (25 R. C. L. 493; 27 C. J., pp. 145, 146 and 147.)

In order to take the case out of the operation of the statute, the consideration must be a benefit to the promisor which was the primary object of making the promise as distinguished from a benefit which is merely incidental, indirect or remote, which will not take the promise out of the statute. ( Choate v. Hoogstraat, 105 F. 713, 46 C. C. A. 174; Clapp v. Webb, 52 Wis. 638, 9 N.W. 796; Commercial Nat. Bank of Appleton v. (Smith) Goodrick, 107 Wis. 574, 83 N.W. 766; McKenzie v. Puget Sound Nat. Bank, 9 Wash. 442, 43 Am. St. 844, 37 P. 668; Ames v. Foster, 106 Mass. 400, 8 Am. Rep. 343.)

An oral promise to pay for benefits previously rendered to a third person is collateral and within the statute unless it is based upon a fresh consideration relating to the personal interest of the promisor and is intended as an independent original contract. (27 C. J. 144; Fuller & Rice Lumber & Mfg. Co. v. Houseman, 114 Mich. 275, 72 N.W. 187.)

BUDGE, J. William A. Lee, C. J., and Taylor, J., concur. Givens, J., dissents.

OPINION

BUDGE, J.

This is an action brought by appellants against respondent to recover $ 4,000, with interest. In the complaint it is alleged, substantially, that the Idaho Coal Mines Company had issued bonds secured by deed of trust; that the Columbia Trust Company was its trustee; that the bonds were not paid; that appellants, attorneys for the trustee, brought an action in foreclosure and obtained a judgment and were awarded in connection therewith attorneys' fees of $ 9,000; that in the decree of foreclosure and order of sale it was provided that in case any of the bondholders of the Idaho Coal Mines Company did not join in a plan by which certain property was to be bid in for the bondholders, they were to be paid in cash.

It is further alleged in the complaint that respondent was interested as a bondholder in acquiring the property for the Teton Coal Company and that he agreed to advance the necessary cash, taking bonds therefor, to satisfy the nonconsenting bondholders of the Idaho Coal Mines Company; that appellants rendered certain services to the Teton Coal Company or to its stockholders subsequent to the foreclosure proceedings above mentioned, and that there was due them for such services the sum of $ 10,000. It is further alleged that "the Teton Coal Company gave to the defendant Samuels full power and authority to settle the claim of these plaintiffs"; that "the attorneys' fees in the foreclosure proceeding of $ 9,000 allowed by the court as above stated, carried interest. Said Samuels promised and agreed with these plaintiffs that if the plaintiffs would remit this accrued interest due on said $ 9,000 and would agree to the sum of $ 8,000 as compensation for the services rendered to the bondholders and the Teton Coal Company in the organization thereof . . . . he, the said Samuels would personally pay the attorneys' fee of $ 9,000 and the said sum of $ 8,000, those sums to be agreed and settled as fees for said services. Although plaintiffs had claimed a fee in excess of the said $ 8,000 for their said services and were entitled to the said interest upon the said $ 9,000, the plaintiffs agreed upon the promise and agreement of said Samuels, to and with said Samuels to accept the said sum of $ 9,000 without interest in said foreclosure proceedings and the said sum of $ 8,000 for their services rendered as above stated. Said Samuels thereupon and thereafter, in pursuance of said agreement, paid to the Columbia Trust Company the balance of the amount due it under the foreclosure proceedings, deducting from the total thereof the interest on the said $ 9,000, and procured from the said Columbia Trust Company a conveyance to the Teton Coal Company of the interest authorized to be conveyed by the bondholders at that time. In addition thereto the said Samuels reaffirmed his agreement to pay the said sum of $ 8,000 to these plaintiffs for the services above mentioned and in pursuance of said agreement thereupon paid to the plaintiffs the sum of $ 4,000 by his own check on account of said $ 8,000 so agreed upon, and promised and agreed that immediately upon his return to Coeur d'Alene, Idaho, which he promised would be within a few days, he would pay the balance of $ 4,000 due unto the plaintiffs."

It is further alleged in the complaint that the contract was oral and made in Salt Lake City, Utah and that plaintiffs released the interest upon said $ 9,000 and agreed to accept the sum of $ 8,000 for their other services in consideration of the agreement on the part of Samuels to pay the sum; that the settlement agreed upon was beneficial to Samuels, he being largely interested in the coal company, having engaged in the promotion thereof and had some arrangement, understanding or agreement under which he was to advance and pay out personally the money for the discharge of the indebtedness to the plaintiffs over and above the amount advanced by the bondholders; that Samuels was desirous of reducing the amount necessary for him to advance to the lowest sum possible, and that he promised personally to make the payments so agreed upon to the plaintiffs and became the principal debtor therefor. It is further alleged that said settlement was for the advantage of Samuels in that it reduced the amount of money which it was necessary for him to personally advance in the development of the affairs and business of the Teton Coal Company and in its promotion and in promoting his own interest therein; that the agreement made by the plaintiffs to waive the interest on the said $ 9,000 and the further agreement to accept the sum of $ 8,000 for their services was upon the distinct understanding and agreement with Samuels that he would personally assume said liability and pay the said moneys, but that he failed, neglected and refused to pay the plaintiffs the balance of the $ 4,000 under his agreement.

To the complaint of appellants respondent filed a general demurrer which was sustained by the trial court. Appellants were granted time within which to serve an amended complaint but refused to do so, electing to stand upon their complaint, whereupon judgment of dismissal was entered, from which judgment this appeal is prosecuted.

The question presented is whether or not appellants have stated a cause of action which takes them without the statute of frauds.

It will be observed from a reading of the complaint that appellants' claim of $ 9,000 was allowed in the foreclosure proceedings against the Idaho Coal Mines Company and was...