Case ID: wis_107/html/0574-01.html
Source: Caselaw Access Project
Author: {"author": "RaRdeeN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Commercial National Bank of Appleton, Wisconsin, Appellant, vs. Smith, imp., Respondent.
    
      September 26
    
    
      October 12, 1900.
    
    
      Bills and notes: Indorsement: Guaranty: Statute of frauds: New and independent consideration: Incidental benefits.
    
    
      1. Under subd. 2, sec. 2307, Stats. 1898, providing that a special promise to answer for the debt of another shall be void unless in writing, subscribed by the promisor, and expressing the consideration, an in-dorsement on a promissory note, “I hereby guaranty the payment of the within note,” signed by the guarantor, is void because it fails to express any consideration. Taylor v. Pratt, 3 Wis. 674, and Parry v. Spikes, 49 Wis. 384, followed.
    '2. R. and S., respectively the payee and guarantor of a note, were stockholders in a corporation in which R. held a controlling amount of stock. S. purchased some of R.’s stock on his own account, and G., the maker of the note, purchased the remainder, neither having any interest in the shares of the other. In payment G. gave the note in suit, Indorsed by S., but the indorsement failed to show any consideration. Held, that the incidental benefit, if any, which might accrue to S. by having R. out, and G. in, as a stockholder of the corporation, did not amount to a new and independent consideration passing between newly contracting parties, and independent of the original contract, so as to take the guaranty out of the statute of frauds (subd. 2, sec. 2307, Stats. 1898).
    
      Appeal from a judgment of the circuit court for Outaga-mie county: JohN GoodlaND, Circuit Judge.
    
      Affirmed.
    
    This action was brought to recover on a promissory note for' $1,000 executed by the defendant Goodrich to one Eow-ell, and by him sold to the plaintiff. The defendant Smith was made a party, as haying signed a guaranty on the back of the note, as follows: “I hereby guaranty the payment of the within note. A. L. Smith.'” Goodrich defaulted. Smith answered in abatement that Eowell was a joint owner of the note with plaintiff, and asked that he be made a party. Tie admitted signing the guaranty as alleged, but set forth that it was a special promise to answer for the debt of another. A jury was waived. On the trial the defendant Smith objected to any evidence under the complaint, on the ground that it failed to state a cause of action. The objection was overruled. After some evidence had been taken, the plaintiff asked leave to file an amended complaint, to which the defendant entered a similar objection. After argument the court sustained the objection and granted judgment for the defendant. The amended complaint, after setting out the execution and delivery of the note with the guaranty, alleged, in substance, that the omission to state a consideration in the guaranty was an oversight, and that Smith did in fact receive a valuable consideration for the execution of said guaranty, which is claimed to rest upon the following facts: Smith and Eowell were stockholders in a corporation, the latter owning a controlling interest and dictating its policy, which was not satisfactory to Smith. He, with the defendant Goodrich, proposed to buy out Eow-ell’s interest; he to retire, and Goodrich to take his place. Eowell was to sell Smith 170 shares, and to Goodrich 470 shares, which would give them the control of the corporation. Goodrich was to give five notes of $1,000 each, and Eowell declined to take said notes unless three of them were guaranteed by Smith, which he consented to, and signed the guaranty on the note in. suit. There was a further allegation that Goodrich made a written pledge of his stock to a trustee to secure the payment of these notes. The plaintiff has appealed from the judgment dismissing the complaint as against Smith.
    
    Für the appellant there were briefs by F. G. Jones and J. 0. Kerwvn, and oral argument by Mr. Kerwin.
    
    They contended, inter alia, that the amended complaint stated a good cause of action against the defendant Smith. Dyer v. Gibson, 16 Wis. 557; Sears v. Loy, 19 Wis. 96; Shook v. Vcm-mater, 22 Wis. 532; Cunningham v. Briotson, 101 Wis. 384; Kail v. Wood, 3 Pin. 308; Tlewett v. Currier, 63 Wis. 386; Young v. French, 35 Wis. Ill; Wyman v. Goodrich, 26 Wis. 21; Houghton v. Fly, 26 Wis. 181; Twohy M. Co. v. Ryan F>. Co. 94 Wis. 319; Griswold v. Wright, 61 Wis.-195; Osborne v. Farmers’ L. c& T. Co. 16 Wis. 35; Clapp v. Webb, 52 Wis. 638; Vogel v. Melms, 31 Wis. 306; Leonard v. Vreden-berg, 8 Johns. 29; Mallory v. Gillett, 21 N. Y. 417; Burr v. Mazer, 2 Pa. Super. Ot. 436, 39 Weekly Notes Oases, 157; Grant v. Diebold S. (& L. Co. 77 Wis. 72; Morga/n v. Soicth Milwaukee L. V. Co. 97 Wis. 278; FLoile v. Bailey, 58 Wis. 434; Lcurson v. Cook, 85 Wis.-564; Puhney v. Farnhamy 27 Wis. 187; Gauger v. Pautz, 45 Wis. 449; Remington v. Palmer, 62 N. Y. 31; Cady v. Shepa/rd, 12 Wis.'639; King v. Ritchie, 18 Wis. 554; Paris v. Barron, 13 Wis. 227; Lu-gueer v. Prosser, 1 Hill, 256; Gorman v. Ketchum, 33 Wis. 427; Hough v. Gray, 19 Wend. 202.
    
      Lyman F. Barnes, for the respondent.
   RaRdeeN, J.

On its face the' guaranty was confessedly bad, under subd. 2, sec. 2307, Stats. 1898, because it failed to express any consideration. It was so held early in the history of this state, and the rule so announced has never been departed from. Taylor v. Pratt, 3 Wis. 674. In a later case (Parry v. Spikes, 49 Wis. 384) the question was again reviewed, and the conclusion in Taylor v. Pratt was affirmed; the court holding that a written guaranty upon a promissory note, though referring to the note, and made at the time with it, and constituting a ground of the credit to the maker, is void, by the statute of frauds, if it fails to express the consideration. These cases are conclusive against the plaintiff unless the facts attempted to be set out in the amended complaint are sufficient to take the case out of the operation of the statute. The plaintiff bases its contention upon Dyer v. Gibson, 16 Wis. 557, and subsequent cases, wherein it is held that the promise of one person, though in form to answer for the debt of another, if founded upon a new and sufficient consideration, moving from the creditor and promisee to the promisor, and beneficial to the latter, is not within the statute of frauds, and need not be in writing subscribed by him and expressing the consideration. The difficulty we find with the plaintiff’s case is that, admitting all the facts alleged to be true, they do not bring this case within the rule above stated. Smith purchased some of Eowell’s stock on his own account. Goodrich purchased the remainder on his own account. Goodrick had no interest in Smith's stock. Smith had no interest in Goodrick’s stock. Rowell parted with nothing, and Smith received nothing to make him Rowell’s debtor. The incidental benefit, if any, which might accrue to Smith-by having Eowell out, and Goodrich in, as a stockholder of the corporation,' will not take the case out of the statute. Clapp v. Webb, 52 Wis. 638. In this case it is said: “Under repeated decisions of this court, the alleged promise is within the statute of frauds unless it was founded upon a new and independent consideration passing between the newly contracting parties, and independent of the original contract. . . . We are not aware of the existence of any rule of law which authorizes the inference that, merely because the promisor may be incidentallv benefited by his promise, his obiect in mak ing it, and the consideration therefor, is such incidental benefit.” A careful reading of the amended complaint fails to disclose any fact or circumstance sufficient to charge Smith as a guarantor, under the rule of the cases mentioned.

By the Court.— The judgment of the circuit court is affirmed.

Oassoday, 0. <T., took no part.