Case ID: ad_130/html/0329-01.html
Source: Caselaw Access Project
Author: {"author": "Smith, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Willis A. Winne, Respondent, v. Solomon Mehrbach, Appellant.
    Third Department,
    January 22, 1909.
    Contract — agreement by stockholder guaranteeing payment of corporate debt — Statute of Frauds — when consideration sufficiently expressed — liability for debts already due.
    As a stockholder and presideut'of a corporation is not individually liable for its debts, by guaranteeing payment of the debts he only assumes a collateral liability as surety.
    His contact guaranteeing .the debt must, therefore, be evidenced by a writing in which the consideration must be expressed or from which it may fairly be inferred.
    Where an officer of a corporation guarantees in writing “ to make good" the liability of his corporation “for ice whatever the company will he short," it may fairly he inferred from the instrument that the guaranty was made on the condition that the vendor continue to furnish ice to the corporation and' there is a sufficient compliance with the Statute of Frauds.
    But the guaranty should be limited to sums due for ice furnished in reliance thereon, and the guarantor cannot be held for ice previously furnished, as there was no consideration for such agreement. ~
    Chesteb, Kellogg and Sewell, JJ., dissented in part.
    Appeal by tbe defendant, Solomon Mehrbach, from a judgment of the Supreme Court in favor of tbe plaintiff, entered in the office of the clerk of tbe county of Albany on tbe 18th day of February, 1908, upon tbe report of a referee.
    
      Jellenik & Stern [Nathan D. Stern of counsel], for the appellant.
    
      Ward & Cameron [ Walter E. Ward of counsel], for the respondent.
   Smith, P. J.:

Tbe action is brought to recover upon the defendant’s guaranty of certain accounts between tbe plaintiff and the Co-operative Ice Company, of which tbe defendant was tbe president. Tbe guaranty is in form as follows;

Sep. 8, ’03.
' “I hereby guarantee and agree to make good, tbe accounts between W. A. Winne and tbe Co-operative Ice Company for ice whatever the company will be short.
“S. MEH REACH.”

It appears in. the case that at the time this guaranty was given the plaintiff was furnishing ice to the Co-operative Ice Company ; that for the ice already furnished the Co-operative Ice Company was owing the plaintiff the sum of $3,134.87 ; that at that time the defendant was under an oral promise to guarantee accounts that the ice company should run with the plaintiff. It further appears that after the signing and delivery of this guaranty the plaintiff continued to furnish ice to the Co-operative Ice Company to the amount of $7,192.81,' Thereafter theCo-operative Ice Coinpany went into bankruptcy. At the request of the defendant the plaintiff’s claim was filed with the trustee in bankruptcy, and the- judgment represents the whole amount due after allowing fci; the dividend received from the trustee in bankruptcy.

The sole defense rests Upon the Statute of Frauds. Wé cannot agree xyith the learned referee that this writing can in any event be construed to be an original contract. Whatever may have been the interest of the defendant as a stockholder in the Co-operative Ice Company, he was not individually liable for its debts. His assumption of liability by the contract in question xvas only of a collateral liability as surety for the non-payment by the ice company. The contract, therefore, xvas clearly one contemplated by the Statute of Frauds, and unless it meets the requirements of that statute the defendant must prevail in this action.

The authorities all agree that the xvriting must express the whole contract. The consideration of the contract must be either expressed or fairly inferred therefrom. In Seymour v. Warren (179 N. Y. 3) the rule is thus stated : “ Ho particular form of words is necessary to be used for expressing the consideration. It is enough if from the whole instrument the consideration appears in express terms, or by fair or necessary inference. As a- general rule the statute is satisfied when the memorandum shows with reasonable clearness that the defendants’ promise is designed to procure something to be done,' forborne or permitted by the party to’whom it is made, either to or for the promisor or a third party. (Citing authorities.) Where the language of the instrument is such as to warrant the inference that the consideration rests upon mutual promises, the writing satisfies all the requirements of the statute.” Upon page 5 the opinion further reads:. The terms of a written instrument are to be construed and understood in the light of all the surrounding circumstances. (Waldron v. Willard, 17 N. Y. 468.) When the situation of the parties is understood in this case, and the subject-matter of the transaction is considered, it is not difficult to draw the inference from the paper to the effect that the owner consented that the defendants should collect the rents of the property and apply them in the manner stipulated on their part, There is no better way of ascertaining the meaning and construction of a written contract than to look at the acts and conduct of the parties under it. (Woolsey v. Funke, 121 N. Y. 87 ; Insurance Co. v. Dutcher, 95 U. S. 269 ; Nicoll v. Sands, 131 N. Y. 19.) ” In Union National Bank v. Leary (77 App. Div. 332) the language of the guaranty was in this form :

“The Union Nat. Bank of Lewisburg, Pa., now holds two notes of The John Good Cordage & Machine Co. to the order of John Good, one for $4,500 and one for $2,500. I will be personally responsible for the payment of the two notes, with interest, within a reasonable time to The Union Natn’l Bk. of Lewisburg.
, “ Bespect. yours,
“JAMES D. LEABY.”

An action upon this guaranty was defended on the ground that the consideration Avas not stated within the requirement of the Statute of Frauds. It was there held that the consideration was sufficiently stated, as there Avas reasonably inferred an agreement to delay enforcement for a reasonable time. At the Trial Term the paper had been held insufficient within the statute. This, holding was reversed and a new trial ordered. That case was again tried and upon appeal came before the Appellate División, and the decision is reported in 95 Appellate Division at page 381, where the rule stated upon the former appeal was adhered to and this decision was affirmed by the Court of Appeals in 183 New York at page 546. In the opinion in 95 Appellate Division, 382, the rule is stated, “ that in arriving at a correct construction of the contract all of the facts and circumstances attendant upon its delivery, the reasons thereof and the purpose sought to be accomplished could be shown.”

We are led by these authorities to conclude that from the paper the consideration may fairly be iii ferred that the plaintiff Ayas to . continue furnishing ice to the Co-operative Ice'Company. The paper speaks of the accounts of the parties. The shortage guaranteed is to the extent that the company will he short.” Thereafter the plaintiff continued' to furnish ice to the Co-operative Ice Company of which the defendant, its president, is presumed to have knowledge. While we find in the paper an expressed consideration as to the future accounts, we are unable to find expressed therein a consideration for the guaranty of past accounts. The agreement by plaintiff to furnish ice in the future at a reasonable price is no consideration for an agreement to pay a debt of another already due. (Pfeiffer v. Adler, 37 N. Y. 164; Belknap v. Bender, 75 id, 446.)

The judgment should,.therefore, be modified by striking therefrom so much as represents the indebtedness due at the date of the signing of the guaranty, and as so modified affirmed, without costs to either party.

Cochrane, J., concurred; Chester, J., voted for affirmance, and Kellogg and Sewell, JJ., voted for reversal.

Judgment modified as per opinion and as modified affirmed, without costs to either party.