Court Opinion

ID: 3865184
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:58:53.570712+00
Date Added: 2024-06-11T13:30:29.915649
License: Public Domain

This case was heard upon the plaintiff's demurrer to the defendant's plea of the statute of frauds. In defence of his plea the defendant contends that the declaration sets up a contract which is within the statute; and also that no cause of action is set forth, because it is not alleged that the amount to be paid by the defendant has been determined in either of the ways specified in the contract.
It was held in Ames v. Hazard, 8 R.I. 145, "that if a declaration be faulty, a demurrer interposed by either party opens the whole record for the judgment of the court upon the first substantial defect in the pleadings, at whatever stage it may arise." And the same well-established rule of common-law pleading is repeated in Railton v. Taylor, 20 R.I. 279, which was decided since the judiciary act went into operation.
Both questions were fully argued and may properly be considered.
The clause of the statute which is claimed to be applicable is part of Gen. Laws R.I. cap. 233, § 6, as follows:
"No action shall be brought. Fourth. Whereby to charge any person upon his special promise to answer for the debt, default, or miscarriage of another person . . . unless the promise or agreement upon which such action shall be brought, or some note or memorandum thereof, shall be in writing and signed by the party to be charged therewith, or by some other person by him thereunto lawfully authorized."
This section has been uniformly interpreted as applying to contracts of suretyship where the liability assumed is to answer for another, to pay the debt or make good the obligation if the original debtor or person bound does not pay or fulfill his duty. Mr. Browne, in his work on the statute of frauds, adopts this criterion. He says, section 192: "It has come to be customary to speak of such special promise as collateral to *Page 392 
the obligation of the original debtor; and though the use of that term as defining the nature of the promise which the statute means to embrace has been sometimes criticized, it is believed to be, not only in the main but in strictness, correct. As will be explained hereafter, there are many cases where the obligation of the defendant is concurrent with that of a third party and is discharged when that is discharged, and yet is not held to be affected by the statute; and for the sole reason, as our subsequent inspection of these cases will show, that it is not essentially an obligation of guaranty of, or, in other words, not essentially collateral to, that of the third party. Understanding by a collateral obligation one which is made for the purpose of securing the performance of another, and which exists only as long as that other exists, it may fairly be said that collateral promises are just what the statute intends shall be proved by writing."
Among the classes of contracts which, though running at the same time, are yet not collateral in the sense defined, is the case of an agreement to purchase the debt. "The principle is," says Mr. Browne, section 210, "that where the transaction between the parties is in its nature a purchase of the debt itself, the defendants promise to pay the whole or any part of the amount to the original creditor, as the consideration of the purchase is not affected by the statute." The principle is stated by Chambre, J., in Anstey v. Marden, 1 Bos.  P.N.R. 133. In summing up the case he says: "This was a contract to purchase the debts of the several creditors, instead of being a contract to pay or discharge the debts owing by Marden. It was of the substance of the agreement that these debts should remain in full force to be assigned to Weston. When he had purchased them he did not mean to exact them rigorously, but the contract was a contract of purchase, and he had a right to make use of the names of the original creditors to recover the same to the full amount, if Marden had effects to satisfy the debts. Instead of being a contract to discharge Marden from his debts, it was a contract to keep them on foot." The fact that the debts were assigned is regarded by Mr. Browne as the cardinal fact in the case. *Page 393 
"This," he says, "is what gives the transaction the distinctive character of a purchase," p. 270, n. 1.
The case of Mallet v. Bateman, L.R. 1, c.p. 163, which is cited by the defendant, held that where a party having an interest in building a house promised a mercantile firm that if they would furnish the contractor materials on credit and draw bills of exchange upon the contractor, he would buy the bills at a certain discount endorsed by the merchants "without recourse." The court held the party to be simply a guarantor for the contractor's debt, and his promise to be within the statute. Whether this case were rightly decided or not, as has been doubted (Browne Stat. Frauds, p. 246, n. 1), it is very different from the case at bar. There the promise, which was construed to be a guaranty, was part of the original transaction, and the rule in such cases is that where credit is given to the person who receives the goods, a promise by another to pay for them is collateral. Wood v. Patch, 11 R.I. 445. The issuing of the bills and the discount of them were held to be merely the machinery for carrying out the contract of guaranty.
The contract set out in the declaration shows a promise by the defendant to buy these debts, not to pay them. The plaintiff agreed not to enforce them against the original debtors, but to have the amount of them determined and then to assign them. He was to retain no claim against the original debtors, but to look for his price solely to the defendant. He accepted the defendant's promise to pay him a sum of money, and promised to give defendant therefor the claims against the corporations and other property. We can see no difference in the essence of this transaction from a sale and purchase of any chose in action. If the contract were one of guaranty it would have contemplated the continuance of the liability of the original debtor to the plaintiff, and the enforcement of that liability by the plaintiff, if possible, before recourse to the defendant, and the extinguishment of the obligation as a debt if it should be paid ultimately by the defendant; but, as was said in Anstey v.Marden, instead of *Page 394 
being a contract to discharge the corporation from its debts, it was a contract to keep them on foot.
The case seems to come directly within that decision, and we think the reasoning in that case is conclusive of this question.
We come next to consider whether, under the terms of the contract set out in the second and third counts, the plaintiff states a present cause of action, and we are of opinion that he does not. The amount to be paid by the defendant was "the amount of the indebtedness of the E. Read Goodridge Manufacturing Company, and of the said Goodridge Company to said Stillman." This indebtedness is alleged to have consisted of a judgment obtained by the plaintiff against the E. Read Goodridge Manufacturing Company upon a claim against that company for services rendered by Stillman and Heaney and assigned to this plaintiff, which the Goodridge Company has become liable to pay, and of a claim against the Goodridge Company for services rendered by Stillman and Heaney for them, also assigned to this plaintiff. The judgment against the E. Read Goodridge Manufacturing Company, of course, is determined; but it does not appear that the Goodridge Company has acknowledged its liability upon it, and the other claim is "undetermined," and the words of the contract, "such amount to be determined by arbitration, legal proceedings or mutual agreement," are applicable. It is argued by the plaintiff that these words are to be construed as meaning an agreement of, or arbitration submitted to by, or legal proceedings between, the parties to this suit, but such a construction cannot be supported in view of the character of the contract and its subject-matter. The claims were apparently not admitted by the party sought to he held. They were to be assigned to the defendant. This provision obviously was designed to give them to him after the amount should have been definitely fixed.
No agreement by the defendant and no arbitration or litigation to which the Goodridge Company was not a party could determine the amount of the claims against it, and until the amount is determined the defendant does not know how much to pay for them and does not promise to pay any amount. *Page 395 
It is alleged that the defendant has waived this condition by giving notice that he refused to carry out his agreement. We do not think the notice had such an effect. It may well be held that the defendant's absolute refusal to be bound by the agreement excused the plaintiff from a tender of an assignment of the claims, but it did not transform a promise to pay a sum of money to be determined in a certain way into a promise to pay an indefinite and unascertained sum, nor did it excuse the plaintiff from the performance of a condition which by the terms of the agreement was to precede any right to demand payment of the defendant. It was not in the power of the plaintiff to compel the Goodrich Company to agreement or arbitration, but it is in his power to have the amount of the claims determined by legal proceedings, and this he must do before he can demand of the defendant the amount so determined.
The demurrer of the plaintiff is sustained. The plea of the defendant to the second and third counts of the declaration is overruled. The demurrer ore tenus of the defendant to the second and third counts of the declaration is sustained.