Case Name: Charles E. Colston, Respondent, v. Francis R. Pemberton, Appellant
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1897-11
Citations: 21 Misc. 619
Docket Number: 
Parties: Charles E. Colston, Respondent, v. Francis R. Pemberton, Appellant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 21
Pages: 619–622

Head Matter:
Charles E. Colston, Respondent, v. Francis R. Pemberton, Appellant.
(Supreme Court, Appellate Term,
November, 1897.)
Statute of Frauds — Original promises — Consideration of guaranty.
. Where a contract of guaranty is entered into concurrently with the principal obligation, the consideration which supports the principal contract also supports the subsidiary one; and hence, upon proof that the law of the state of Tennessee is upon this point the same as our own, the assignee of the holder of a corporate note, in all respects a Tennessee contract, and which states upon itsf face that it is given for value received, may recover upon a guaranty of it, executed by the president and principal stockholder of the corporation and upon the faith of' which note and guaranty the holder advanced money.
Colston v. Pemberton, 20 Misc. Rep. 410, affirmed.
Appeal by the defendant from affirmance by the General Term of the City Court of a judgment in favor of plaintiff.
F. S. Smith, for appellant.
Russell, Robinson & Winslow, for respondent.

Opinion:
McAdam, J.
The action is by the plaintiff,. as assignee of Robert D. Whitice,, to recover upon a guaranty executed by the defendant in the name of F. R. Pemberton & Co., of a note of the Kensington Land Company, a Tennessee corporation. The note and guaranty were executed at Chattanooga, Tennessee. Both Whitice and the defendant resided in said city and state, and the contract was to be performed there. It was essentially a Tennessee contract.
The defendant pleads the ¡Statute of Frauds, and the first question presented by the parties is, whether the statute of Tennessee or that of tins state governs. The plaintiff, insists that it is the former, and the defendant that it is the latter. As the laws of both jurisdictions coincide in respect to the point upon which the right to a recovery depends,-it is .unnecessary to the disposition of the appeal to determine which statute controls. The necessity for such determination can arise legitimately only where the lex loci contractus and. the lex fori are in conflict, and the court is required to follow the one and reject the other. ' .
In Hall v. Rogers, 7 Humph. 540, the Supreme Court of Tennessee, the highest in the state, followed the rule laid down by Kent, Ch. J., in Leonard v. Vredenburgh, 8 Johns. 29, 30, and adopted the classification of cases -made by that eminent jurist, first-in which are " cases in which the guaranty or promise is collateral to the principal contract, but is made at the same time, and becomes an, essential ground of 'the credit given to the principal Or direct actor, Here is not, nor need be, any other consideration, •than that moving between the creditor and the original debtor."
This classification of the cases has been a landmark of the law of our state for more than half' a century, Bayl. S. & G. 66. Following it the Court of Appeals in Erie County Savings Bank v. Coit, 104 N. Y. at p. 537, said: " Where a contract of guaranty is entered into concurrently' with the principal obligation, á consideration which supports the principal Contract supports the subsidiary one also. We understand this to be the settled doctrine." Citing McNaught v. McClaughry, 42 N. Y. 22; Simons v. Steele, 36 N. H. 73; Brandt Suretyship, § 6, 7. " And the consideration need not be expressed in the guaranty." See, also, Evansville N. Bk. v. Kaufman, 93 N. Y. 273.
Barney v. Forbes, 118 N. Y. 580, rélied on by the defendant, in no manner conflicts with the rule declared, for that case applies, as the language of the court unmistakably states (at p. 585), to "a ^written guaranty given by a third party tó a creditor, that- his debtor will thereafter pay to him a pre-existing debt," and in that particular instance the guaranty "must, notwithstanding the amendment of the Statute of Frauds by chapter 464 of the Laws of 1863, expressly or by fair implication disclose that the promise rests on a legal consideration." Citing. Castle v. Beardsley, 10 Hun, 343; Drake v. Seaman, 97 N. Y. 230; Reed St. Fr., § 423, 426. Such a guaranty falls among the cases ranked second in Kent's classifi cation, wherein " the collateral undertaking is subsequent to the creation of the debt; and was not the inducement to it . Here must be some further consideration shown for the consideration for the original debt will not attach to this, subsequent promise."
The case at bar is not in the second but in the first division of Kent's classification; and respecting such cases the Court of Appeals (McNaught v. McClaughry, 42 N. Y. at p. 24) has said:- " Suretyship upon promissory notes may be made in various forms, as by becoming an undersigner, an indorser or formal guarantor. In every form the existence of a sufficient consideration between the maker and the lender establishes a sufficient consideration also as against the surety. In practice there is usually no communication between the lender and the surety. The business is transacted between the principals alone.' A borrower applies to a bank for a loan, offering to furnish the name of his friend as security, or presents, in the first instance, a note so indorsed. It is neither customary nor necessary for the bank to investigate the relation existing between, or the motives operating upon, the different parties. It is enough that it is the fact that the one is willing to become surety for the other. In inquiring into the considera-, tion, we inquire, therefore, only so far as to. ascertain that a sufficient consideration exists between the principals in the transaction."
Following the inquiry suggested we find by the amended complaint, and the admissions of the answer made either expressly or by not denying the allegations of said complaint (Code, § 522), that the defendant was the president and principal stockholder in the Kensington Land Company, and, therefore, interested in the discharge of its obligations; that the defendant at the instance of said corporation made and subscribed the guaranty previous to the delivery to and acceptance by Whitice of the note in suit; and that the note was made as expressed on its face for value received. Story Prom. Notes, § 51; Edwards Bills and Notes, 169; Daniel Neg. Inst., § 161.
Under the circumstances it will be inferred that the value received by the maker was parted with for note and guaranty, because delivered at the same time in consummation of a single transaction, to-wit, an advance of money or property on the credit of both obligors; and thus the case is brought directly within the rule prevailing both in Tennessee and in New York — that no consideration moving directly to the promisor from the creditor was necessary, and consequently none need be- expressed in the- guaranty. Taylor v. Ross, 3 Yerg. 332; Campbell v. Findley, 3 Humph. 330; State v. Humphreys, 10 id. 444; Gilman v. Kibler, 5 id. 24; Erie County Sav. Bk v. Coit, supra; Baylies S. & G. 57.
The ground upon which the recovery was had, therefore, violated no rule-of law, procedure- or evidence prevailing in this state, and as there was.,a- valid consideration for the guaranty both under the law of Tennessee and that of this, state the motion. to dismiss the complaint was propqrly denied, and - the. exception to .such denial is' unavailing.
The judgment must he affirmed, with nosts. :
Daly, P. J., and Bischoff, J., concur.
Judgment affirmed, with costs.