Case ID: hill_3/html/0584-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court, Nelson, Ch. J. Bronson, J. dissenting.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Mankow vs. Durham & Moulthrop.
    A negotiable promissory note was transferred by the payee before due, with an endorsement thereon signed by him and another in these words—“ We guarantee the payment of the within note.” Held, that the endorsement, being in legal effect a promissory note, imported a consideration, and so was not void within the statute of frauds.
    Bronson, J. dissented, holding that the endorsement was not a promissory note, but a mere undertaking to pay the debt of a third person; and that, as it neither expressed a consideration nor imported one, it was void.
    The case of Packer v. Willson, (15 Wend. 343,) overruled. Semble.
    
    Where an absolute guaranty of payment is made contemporaneously with the note in which it is endorsed, the note itself furnishes a sufficient consideration to sustain the guaranty. Per Nelson, Ch. J.
    Otherwise of a note and guaranty made at different times; for, in such case, the guaranty can only be sustained, if attacked for want of consideration, hy proving an independent one. Per Nelson, Ch. J.
    Error to the Oneida C. P. Manrow sued Durham and Moulthrop before a justice, and on the trial in the C. P., where the cause had been removed by appeal, the plaintiff gave in evidence a promissory note as follows: “Verona, July 1st, 1839. On the first day of January next I promise to pay C. P. Durham or bearer forty dollars, value received, with interest. (Signed) Ephraim Durham.” On the back of the note was endorsed the guaranty on which the plaintiff sued, as follows:
    “We guarantee the payment of the within note. Deck 12th, 1839.
    C. P. Durham, Durhamville,
    Anson Moulthrop, Durhamville.”
    The plaintiff proved that the defendant, C. P. Durham, was the payee of the note; that he purchased a horse of the plaintiff on the day the guaranty bears date, and gave him the note in part payment, with the guaranty endorsed thereon—Moulthrop signing the guaranty at the request of, and as the surety of C. P. Durham. The plaintiff was non-suited, on the ground that no consideration was expressed in the guaranty, and that the contract was therefore void within the statute of frauds. The plaintiff excepted, and, after judgment, sued out a writ of error.
    JV. F. Graves, for the plaintiff in error.
    
      W. S. Parkhurst, for the defendants in error.
   By the Court, Nelson, Ch. J.

I am of opinion the court below erred. The contract sued upon is, in substance and legal effect, a promissory note. As such it imports a consideration 3 and is not, therefore, within the statute of frauds. All the numerous cases in which it has been held that blank endorsements of promissory notes might be filled up, and the parties thus bound as makers or absolute guarantors, were taken out of the statute upon this principle. The objection is not new, as it will be found to have been taken in nearly all the cases of this class. Most of them are cited in the recent case of Oakley v. Boorman, (21 Wend. 588.) And see Park v. Brinkerhoff and others, (2 Hill, 663.)

The present case is not distinguishable in principle from Hough v. Gray, (19 Wend. 202,) Ketchell v. Burns, (24 id. 456,) or Lequeer v. Prosser, (1 Hill, 256.) The contract is the same in form and substance as in those cases, and in each of them we held it to be an original undertaking, upon which the defendant might be made liable as the maker of a promissory note. (See also McLaren v. Watson’s ex’rs, 26 Wend. 430, per Walworth, Ch.) It is true, in some of the cases cited the question did not arise under the statute, as the consideration was expressed in the guaranty. But whether expressed or not is wholly immaterial 3 for, regarded in the light of a promissory note, the instrument imports a consideration as clearly as if expressed. In Hough v. Gray., however, no consideration was expressed, and the instrument was, in terms, like the one in question. I concede that the latter was a case in which the guaranty was endorsed >at. the time of the making of the note. But that is an unimportant fact as respects the form of the instrument; for if, in order to be binding within the statute, it must express a consideration upon its face, and it be not enough that the nature of the contract import one, the objection would be fatal without regard to the time of the execution of the instrument. The only difference between the two cases is this : Where the guaranty and note are contemporaneous, you may resort to the note to sustain the consideration of the guaranty, if sought to be impeached. The note contains aliment to support the guaranty. But when the guaranty is made at a different time, it must be sustained, if attacked for want of consideration, by showing an independent one. In this case, for instance, if the defendants had sought to rebut the presumption of consideration arising from the nature of the instrument, the plaintiff could have sustained it by proof that it was made for property delivered ; as may be done in all cases between payee and maker, where the consideration of a note is attacked.

In the case of Miller v. Gaston, (2 Hill, 188,) we entertained no doubt that Miller might have sustained an action upon the guaranty against Gaston alone, as upon a new note, though the guaranty was made some months after the date of the note ; and so the case was understood by the reporter, according to his marginal note of it.

In the case of Oakley v. Boorman, (21 Wend. 588,) the endorsement was made some two months after the note, and the defendant was held liable as having intended by such endorsement to guaranty the payment of the note in that form. The endorsement was in blank, and if a contract of endorsement had been written over the name of the defendant, it would have been nothing more nor less than an agreement to pay the note, if the makers did not, on demand and notice—a conditional agreement to pay, importing a consideration. Here there is an original, absolute agreement to pay the note, importing the same thing, and therefore equally out of the statute. I admit, the case of Packer v. Willson, (15 Wend. 343,) mili tates against the doctrine here contended for ; but it may be said of that case, that, at the time it was decided, a very prevalent opinion obtained with the profession, that a consideration could not, since the revised statutes, be inferred or implied for the purpose of sustaining an undertaking to pay the debt of another. (2 R. S. 135, § 2, sub. 2.) Indeed, it seems to have been even doubted by the learned chancellor in Rogers v. Kneeland, (13 Wend. 121,) whether a seal would import a consideration within the new provision. That severe strictness of construction, however, has been since repudiated in repeated1 cases ; and if the case of Packer v. Willson is to be regarded as in conflict with the several authorities upon which I have placed the decision in the present case, I think it is impossible any longer to uphold it. For, should the judgment of the court below be maintained, we must give up the whole series of cases in this court, where plaintiffs have been allowed to recover upon blank endorsements of non-negotiable paper. I am not prepared for so sweeping an innovation. On the contrary, I think our course of decisions may be sustained upon sound and consistent principles, without impugning or in any way innovating upon adjudged cases.

Bronson, J. dissenting.

The language of the statute is as follows : “ Every special promise to answer for the debt, default or miscarriage of another person shall be void, unless such agreement, or some note or memorandum thereof, expressing the consideration, be in writing, and subscribed by the party to be charged therewith.” (2 R. S. 135, §2.) The defendants have made a “ special promise to answer for the debt of another person,” to wit, Ephraim Durham, and the promise is in writing; but the writing does not express the consideration upon which the promise was made. No one upon reading the guaranty can say, that the consideration for the promise was the sale of a horse by the plaintiff to the defendant C. P. Durham. Nor can he say that the consideration was money paid, or any thing else in particular. And what is still more important, it cannot be gathered from the writing itself that there was any consideration whatever for the promise. None is either mentioned or acknowledged to have been received. It is a mere nudum pactum. True, when we look beyond the written contract, we find that there was in fact a consideration for the undertaking. But that is not enough. There must be a writing “ expressing the consideration,” as well as the promise. If the statute be not a mere dead letter, this guaranty cannot be supported.

Our former statute on this subject was taken from the 29 Car. 2, c. 3, which required that the agreement should be in writing ; but nothing was said, in terms, about the consideration. And yet upon the construction of that statute it was held,, in the leading case of Wain v. Warlters, (5 East, 10,) that the consideration as well as the promise must be in writing, and that the defect could not be supplied by parol proof that there was in fact a good consideration. That decision was followed by this court in Sears v. Brink, (3 John. R. 210,) and such has been considered the settled law ever since that time. See per Nelson, J. in Rogers v. Kneeland, (10 Wend. 250—254,) and the cases there cited. Under the old statute it was not necessary that the consideration should be set forth in terms. It was sufficient if it could be collected by fair inference from the written agreement. And in Newbery v. Armstrong, (4 Car. Payne, 59,) Tindal, Ch. J. said it would do “ if we can, as it were, spell it out from the agreement.” But still the consideration must be gathered from the written contract itself, and not by resorting to parol evidence to help out the writing.

The present statute, by requiring the consideration to be expressed, seems to have been aimed against the practice of making out a consideration by argument and inference, and so the matter was considered by this court in Smith v. Ives, (15 Wend. 182,) and Packer v. Willson, (id. 343.) But without laying any stress upon the change in the language of the statute, this guaranty is void, because it neither expresses any consideration, nor can any be collected by fair inference from the terms of the writing. No one can even spell out a consideration. The words are—“ We guarantee the payment of the within note.” This is the whole of it, and there is nothing but an undertaking to answer for the debt of a third person, without a shadow of consideration for the promise. There has never been a time since the decision in Wain v. Warlters, when this would have been held a binding agreement. In Packer v. Willson, (15 Wend. 343,) this court decided the precise question. There the words were—“ I guaranty the payment of the within note in six months.” Change “ I” into “ we” on account of the number of guarantors, and omit the time, and then the two agreements are identical. In one respect that is a stronger case than this. • There, the note was over due at the time the guaranty was endorsed. From that fact, and the further one that the defendant guarantied the payment of the note “in six months,” it was possible to infer, or rather to conjecture, that there was a consideration for the promise; to wit, forbearance to call on the makers of the note until the six months had expired. But here, the note was not due at the time of making the guaranty, and the undertaking of the defendant was, that the note should be paid at maturity. It is impossible therefore to infer that forbearance to call on the maker was the consideration for this undertaking. The guaranty in Packer v. Willson was declared void as coming within the statute of frauds, and unless that case is overruled, this guaranty must share the same fate.

Where, at the time a note is made and as a part of the same transaction, a third person endorses an absolute guaranty upon the note, he will be liable in some- form for the payment- of the money. Both instruments taken together make but one contract, and the consideration which upholds the one will support the other. (Hough v. Gray, 19 Wend. 202 ; Lequeer v. Prosser, 1 Hill, 256 ; Miller v. Gaston, 2 id. 190, per Bronson, J. ; and per Walworth, C. in Rogers v. Kneeland, 13 Wend. 122,123.) But here, the guaranty was endorsed long after the making of the note, and was wholly collateral to the under" taking of Ephraim Durham. It was a distinct, independent agreement, and required a new consideration to support it. In Hough v. Gray and Lequeer v. Prosser, the statute of frauds was not even mentioned; nor was it mentioned in Ketchell v. Burns, (24 Wend. 456.) If this question was decided in either of those cases, it was decided when it was not made, and, I must add, when I did not know it.

It is quite clear that this case is not decided—at least not in favor of the plaintiff—by Oakley v. Boorman, (21 Wend. 588.) There, the defendant endorsed his name in blank upon three negotiable promissory notes, and he was held liable as endorser— not as guarantor. It was neither more nor less than the ordinary contract of endorsement, and the only peculiar feature in the case was, that the endorsement was not made upon the consideration which usually moves to the making of such a contract. So far is that case from holding that the defendant might have been charged as guarantor, that Cowen, J., who delivered the opinion of the court, expressly admits the contrary. Here, the defendants did not endorse their names in blank on the note, and they could not be charged as endorsers for the plain reason that they entered into an express undertaking of another kind.

In addition to the contract of endorsement upon commercial paper, there are cases which hold that if a man endorse his name in blank upon a note not negotiable, with intent to guaranty the payment, you may write such a contract over his name as will carry into effect the intention of the parties. Some, and perhaps all of those cases are cited in Oakley v. Boorman. I will not stop to enquire on what foundation they rest. It is sufficient to say that they can have no application here. The defendants did not endorse their names in blank. They drew out and signed the agreement which they intended to make, and if that does not bind them, the plaintiff cannot recover. To hold otherwise would be saying, in effect, that we can set aside the contract which the parties have actually made, and substitute another in its place. On that subject it will be sufficient to refer to Seabury v. Hungerford, and Miller v. Gaston, (2 Hill, 80 and 188,) where we decided that the holder of a note could not change either the contract of endorsement or of guaranty into a contract of a different nature.

This guaranty is not a promissory note. It is not an absolute promise, nor, indeed, any promise at all, to pay a sum of money, but an undertaking that another person, to wit, Ephraim Durham, will pay the money. A guaranty is u an undertaking that the engagement of another shall be performed.” ( Webster’s Diet.) It is “ a promise or undertaking to be answerable for the debt or default of a third person.” (Tomlins1 Law Diet.) “ A guarantee is a promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another person, who is, in the first instance, liable to such payment or performance.” (Fell on Guar. 1.) A guaranty in its enlarged sense, is a promise to answer for the payment of some debt, or the performance of some duty, in the case of the failure of another person, who, in the first instance, is liable.” (3 Kent, 121.) That is the contract which the defendants made. Ephraim Durham first owed the debt, and promised to pay it. And then the defendants said—“ We guarantee the payment.” This is a contract well known to our law. It differs in its nature and consequences from a promissory note, and there is no principle upon which the two instruments can be confounded.

All the books agree that a guaranty is within the statute of frauds. I will therefore only refer to two or three elementary writers. (3 Kent, 121; Fell on Guar. 8 ; Theob. Principal and Surety, 5,36.) The idea that the statute might be got rid of by calling the guaranty a promissory note, seems never to have been been thought of in Westminster Hall. In James v. Williams, (5 Barn, & Adolph. 1109,) the action was on the following guaranty—“ As you have a claim on my brother for 51. 17s., for boots and. shoes, I hereby undertake to pay you the amount within six weeks—say the 4th of January, 1833.” The promise was a direct and absolute one to pay a specified sum at a particular day; and yet, as it appeared to be a promise to pay the debt of another, and as no consideration was expressed in the writing, the undertaking was held to be void within the statute of frauds. That was a stronger case than this, for here there is no direct promise to pay—it is a guaranty that another will pay. Clancy v. Piggott, (2 Adolph & Ellis, 473,) is another case to the same effect, and where the •instrument might better be called a promissory note than the one now before us. We decided the same way in Packer v. Willson, (15 Wend. 343 ;) and if there be any case holding that this undertaking for the debt of a third person is not within the statute of frauds, it has not fallen under my observation.

If the plaintiff can recover in this action, what will be left of the statute of frauds 1 Nothing but the requirement that the promise shall be in writing. There need not be an agreement <£ expressing the consideration.” If the party make a written promise of any kind, it is a promissory note, and a consideration is implied. When there is a simple promise in writing to pay money, and nothing else appears, the instrument may well be regarded as a promissory note, and the contract may stand upon a consideration implied by law. But when by the terms of the agreement the party engages “ to answer for the debt, default, or miscarriage of another person,” or to pay the debt if he does not, the case falls directly within both the letter and spirit of the statute. The instrument is not a promissory note, and if no consideration be mentioned, the agreement is void.

On another section of the statute of frauds we stand corrected by the decision of the court of errors in Davis v. Shields, (26 Wend. 341.) That decision has been approved and followed at the present term in the case of Lawrence v. Crapser, which was decided on the argument. I concurred ■ in the judgment which was reversed in Davis v. Shields ; not because I deemed it in accordance with the statute, but because I thought we were tied down by adjudged cases. The court of errors has relieved us from that thraldom, and although their decision has no direct bearing upon the present question, it should at least admonish us not to make a new departure from the statute of frauds.

I am of opinion that the court below was right in nonsuiting the plaintiff, and that the judgment should be affirmed.

Judgment reversed. 
      
      
         See Douglass v. Howland,, (24 Wend. 35.)