Rose v. Wollenberg

Mr. Justice Wolverton, after making the foregoing statement, delivered the opinion of the court. The question presented by this record is, whether the alleged agreement between the plaintiff and defendant “ that the liability of plaintiff should be a one third proportion and that of the defendant should be — 273 — a two thirds proportion of any liability that might occur under said bond to said sureties,” not having been entered into in writing, is within the statute of frauds and perjuries, and therefore void; and, if not, another question arises, and that is whether the evidence presents a prima facie case sufficient to go to the jury. It is settled by Durbin v. Kuney, 19 Or. 71 (23 Pac. 661), that, as between cosureties, where one of their number has paid more than his proportion of the common liability, no special agreement having been entered into between themselves, the iaw raises an obligation upon the part of the other cosureties to repay him the excess which he has been compelled to pay, upon the principle that where there is a common liability equality of burden is equity. Formerly equity alone entertained jurisdiction to compel contribution, but latterly courts of law, having borrowed the jurisdiction, are competent, in most cases, to administer relief. It is said in the case cited “ that the doctrine of contribution does not depend upon contract, but is bottomed and founded upon principles of natural justice. The contract upon which they are co-debtors or sureties only expresses the relation between them and their creditor, and is entirely distinct from the right of contribution, which exists between themselves.” While the law, upon principles of natural justice, raises the obligation of equitable contribution among cosureties, it by no means follows that they are inhibited from fixing or determining their relative liabilities by express contract or agreement among themselves. Indeed, the right to enter into any agree — 274 — ment in respect of such liability as their discretion or judgment may dictate is not questioned. The important question is whether such contracts or agreements are within the statute of frauds, requiring all contracts for the debt, default, or miscarriage of another to be contained in some note or memoranda in writing, expressing the consideration, signed by the party to be charged: (Hill’s Ann. Laws, § 785). It is well settled that the true relations existing between joint, or joint and several, promisors or obligors upon a note or bond, or other instrument of writing, can be shown by parol, whether principals or sureties. The writing is paramount, and fixes liability as it pertains to the payee or obligee, but, as between the makers or obligors, their correlative undertakings, whether in the capacity of principals or sureties, may be otherwise ertablished. The principal who has obtained the benefit of the contract or suffered the forfeiture of his bond or obligation is always bound to indemnify his surety who has sustained loss upon his account, and he cannot interpose the statute of frauds to prevent it. But when we go a step farther, to the proposition which involves the undertaking of one surety to indemnify another, in whole or in part, against liability upon their principal’s obligation, or, as is alleged in the case at bar, an agreement between themselves fixing upon a different ratio of liability than that which the law raises or implies, we find much contrariety of opinion and authority as respects the enforcement of such undertaking or agreement where it rests in parol. The earliest case to which our attention has been called is that of Thomas v. Cook, 8 B. & C. 727. It — 275 — there appeared that one person requested another to become surety with him for a third party under promise of indemnity against payment. In deciding it Bayley, J., says: “Here the bond was given to Morris as the creditor, but the promise in question was not made to him. A promise to him would have been to answer for the default of the debtor. But, it being necessary for W. Cook, since deceased, to find sureties, the defendant applied to the plaintiff to join him in the bond and bill of exchange, and undertook to save him harmless. A promise to indemnify does not, as it appears to me, fall within either the words or the policy of the statute of frauds.” This was in 1828. In 1839, Green v. Cresswell, 10 Adol. & E. 453, was decided by the same court, which may be taken to have overruled Thomas v. Cook, at least the reasoning of that case was severely criticised. The case was this: The plaintiff, at the request of defendant and under his promise to indemnify and save him harmless, became surety for one Hadley upon a bail bond in a civil action. The defendant did not join as co-surety. The undertaking was held to be within the statute. The court distinguishes Thomas v. Cook, by reason of the fact that both the plaintiff and defendant therein joined as cosureties. Subsequent authorities have assigned as a reason for the distinction that, where the defendant is cosurety, he is, as such, and without any special promise, liable already to contribute, and that his special promise to pay the whole may be regarded as but a matter of regulation of contribution between the two sureties. In Browne on Statute of Frauds (4th ed.), § 161a, it is argued that — 276 — the reason is not well assigned because,— First, that, though called ‘regulation’ or ‘contribution,’ it is really a promise to pay what he was not otherwise liable to pay for a third party; and, secondly, that he was never liable to contribute at all except by force of the relation of cosuretyship into which he entered, and owed no antecedent debt of his own.” These cases gave rise to the subsequent divergence of opinion on the subject treated therein, and the decisions of courts of different jurisdictions are to be largely distinguished in that they have followed the one or the other of these early authorities. Reader v. Kingham, 13 C. B. (N. S.) 344, a later English case, decided in 1862, and arising out of a similar state of facts, although not overruling is in direct conflict with Green v. Cresswell. In Cripps v. Hartnoll, 4 Best & S. (Q. B.) 414, the court would not say that it could lend its support to Green v. Cresswell. But in a much later case, decided in 1874, Wildes v. Dudlow, L. R. 19 Eq. 198, Geeen v. Cresswell was expressly overruled, and Thomas v. Cook, approved and followed. In that case the son, at the request of his father, became surety for a third party, the father not signing as a cosurety; and it was held to be an original contract for indemnity, and not within the statute of frauds. By a very recent case (Guild v. Conrad, 63 Q. B. Div. 721, decided in 1894), it was held that Green v. Gresswell, was no longer binding, but that Thomas v. Cook, was good law. So that it may be said that in England the doctrines has been finally settled in harmony with the latter case. The authorities among the states of this country — 277 — are much divided upon the subject. Among the earlier cases to be found is Chapin v. Merrill, 4 Wend. 657, decided in 1830. The facts stated are that plaintiff, at the request and upon the solicitation of the defendant, and under a promise of indemnity, entered into an undertaking under seal with one Asa Ransom, by which they covenanted with a mercantile firm that if they would supply one Asa Ransom, Jr., with goods, they, the cosureties, would pay such an amount unpaid by Ransom, Jr., not exceeding $2,000, as should be due the firm. The defendant had no interest in the goods. Marcy, J., in deciding the case, says: “The contract on which this action is brought is not, in my opinion, within the statute of frauds. The action ie brought on the parol undertaking of the defendant to save the plaintiff harmless. * * * The promise in this case was original, and not a collateral undertaking; but had it a sufficient consideration? It is not disclosed that the defendant received any benefit from what was done by the plaintiff, nor is it necessary, as I conceive, that he should to make him liable. In Tomlinson v. Gill, 1 Amb. 330, and Read v. Nash, 1 Wils. 305, it does not appear that the defendant did or could derive any benefit from their undertakings, yet they were held liable on them. The consideration was the harm to the plaintiffs. In this case the consideration was the assumption of the plaintiff of a responsibility on which he was obliged to pay about $600. This is an abundant consideration for the undertaking on which this action is brought.” This case was subsequently overruled by the Supreme Court óí New York (Kingsley v. Balcome, 4 Barb. 131). which latter was a case wherein — 278 — plaintiff became bail upon arrest at the request of defendant, who promised to indemnify and save him harmless. The opinion is based to some extent upon the express authority of Green v. Cresswell. In a later case (Barry v. Ransom, 12 N. Y. 462), decided in 1855, it was held that a surety who became such upon a tax collector’s bond at the request of his cosurety, and under promise of indemnity could not be required to contribute, the cosurety having paid the whole loss. Denio, J., says: “The cases where the person making the promise was himself bound for the default of the third person are uniform in holding the contract to be unaffected by the statute.” Thus distinguishing Green v. Cresswell and Kingsley v. Balcome, and following Thomas v. Cook, the court concludes: “I am of opinion that where a person is about to become bound by writing to answer for the default of a third party, and he procures another to be bound with him in the same obligation, by promising to indemnify him, this is an original promise, and not within this branch of the statute of frauds.” The same result was reached in a Massachusetts case (Blake v. Cole, 22 Pick. 97) based upon a similar state of facts. In a later case from the same state (Aldrich v. Ames, 9 Gray 77) in which the facts are not stated, except that the promise was made for a valuable consideration, Shaw, J., says: “ The theory of the statute of frauds is this: That when a third party promises the creditor to pay him a debt due to him from a person named, the effect of such a promise is to become a surety or guarantor only, and shall be manifested by written evidence. The promise in such case is to the creditor not to the debtor. For — 279 — instance, if A, a debtor, owes a debt to B, and C promises B, the creditor, to pay it, that is a promise to the creditor to pay the debt of A. But in the same case should C, on good consideration, promise A, the debtor, to pay the debt of B and indemnify A from the payment, although one of the results is to pay the debt of B, yet it is not a promise to the creditor to pay the debt of another, but a promise to the debtor to pay his debt. This rule appears to us to be well settled as the true construction of the statute.” These earlier cases are sufficient to illustrate the distinguishing features between the prevailing antagonistic opinions in this country. The leading and perhaps the best considered cases to be found which follow in the wake of Green v. Cresswell and Kingsley v. Balcome, are Easter v. White, 12 Ohio St. 219; Bissig v. Britton, 59 Mo. 204 (21 Am. Rep. 379); Macey v. Childress, 2 Tenn. Ch. 438, and Nugent v. Wolfe, 111 Pa. St. 471 (56 Am. Rep. 291). The Ohio case was decided long prior to the English case of Wildes v. Dudlow, while the Missouri case was almost concurrent in time with it, but without knowledge of its announcement and was not in any manner controlled by it. The other two cases cite it with disapproval. The clearest illustration of the principle maintained by these cases is to be found in Nugent y. Wolfe. The First National Bank of Eayenna, Ohio, had obtained judgment against Powers and Company. Nugent went security for Powers and Company, as he alleges, at the request of Wolfe, accompanied with a verbal undertaking, or agreement to save Nugent harmless in his undertaking for Powers and Company — 280 — with the bank. The court in deciding the case, says: “There is no testimony, nor was any offered, to show that defendant had any personal interest in the judgment on which bail was entered, or that he held property or funds that should have been applied to the payment thereof. So far as appears, it was the proper debt of Powers and Company, and the substance of defendant’s agreement is that he would see that they paid it; and, if they failed to do so, he would pay it for them. It was literally a promise to answer for the default of Powers and Company. Plaintiff’s liability as bail for stay was merely collateral to the debt in judgment, and had in contemplation nothing but the payment thereof to the bank.” The cases which are usually classed as following Thomas v. Cook and Chapin v. Merrill may be subdivided into three classes, in consideration of the grounds upon which each is apparently sustained. First — It is held that where the inducement for the promise of indemnity is a benefit to the promisor which he did not before or would not otherwise enjoy, as where he has a personal, immediate, and pecuniary interest in the principal transaction, and is therefore himself a party to be benefited by performance on the part of the promisee, the contract is not within the statute and may be supported by a verbal undertaking. In reality the undertaking is to pay a debt which is, in substance, the debt of the promisor: Smith v. Delaney, 64 Conn. 264 (42 Am. St. Rep. 181, 20 Atl. 496); Davis v. Patrick, 141 U. S. 479 (12 Sup. Ct. 58); Reed v. Holcomb, 31 Conn. 360; Potter v. Brown, 35 Mich. 274; Hilliard v. White (Tex. Civ. App.), 31 — 281 — S. W. 553; Emerson v. Slater, 63 U. S. (22 How.), 43. The doctrine established by these authorities does not seem to be at variance with Green v. Cresswell and Kingsley v. Balcome. See Waterman v. Resseter, 45 Ill. App. 155-165. It cannot be true, as has been intimated, that a new and independent consideration, moving from the promisor to the promisee, will support a verbal promise, for this does not meet the statute, as the writing or memorandum which the statute requires must itself be supported by a consideration. See Mallory v. Gillett, 21 N. Y. 412. Second— The promise of indemnity is not a contract with the creditor to answer for the default or miscarriage of the debtor, but is independent of the principal contract or obligation, and constitutes an entirely distinct and separate undertaking, with which the creditor has nothing to do, and which cannot avail him or redound to his benefit in any manner. In such a case the assumption of the liability by plaintiff is itself a sufficient consideration to support the promise, regardless of any subservient interest of the promisor, or of the fact of his becoming cosurety with the promisee, and it need not be in writing: Mills v. Brown, 11 Iowa, 314; Dunn v. West, 5 B. Mon. 376; Lucas v. Chamberlain, 8 B. Mon. 276; Holmes v. Knight, 10 N. H. 175; Jones v. Bacon, 72 Hun, 506 (25 N. Y. Supp. 212), same case on appeal, 145 N. Y. 446 (4 N. E. 216); George v. Hoskins (Ky.), 30 S. W. 406; Shook v. Vanmater, 22 Wis. 532; Vogel v. Melms, 31 Wis. 306 (11 Am. Rep. 608); Boyer v. Soules, 105 Mich. 31 (62 N. W. 1000); Minick v. Huff, 41 Neb. 516 (59 N. W. 795); Tighe v. Morrison, 116 N. Y. 270 (5 L. R. A. 617, 22 N. — 282 — E. 164); Wildes v. Ludlow, and Chapin v. Merrill, 4 Wend. 657. Third — Where the promisee, under the promisor’s agreement to indemnify and save harmless, becomes jointly liable as cosurety with him for the same obligor, such an agreement is held to be an original undertaking, and not within the statute. As sustaining this proposition, Thomas v. Cook, 8 B. and C. 727, is directly in point. See also Horn v. Bray, 51 Ind. 555 (19 Am. Rep. 742); Apgar’s Administrators v. Hiler, 24 N. J. Law, 812; Chapeze v. Young, 87 Ky. 476 (9 S. W. 399); Adams v. Flanagan, 36 Vt. 400; Baldwin v. Fleming, 90 Ind. 177; Houck v. Graham, 123 Ind. 277 (24 N. E. 113); Barry v. Ransom, 12 N. Y. 462; Jones v. Letcher, 13 B. Mon. 363; Oldham v. Broom, 28 Ohio St. 41 (43 Am. Rep. 419); Brandt on Suretyship and Guaranty, § 226; Mickley v. Stocksleger, 10 Pa. Co. Ct. R. 345; Blake v. Cole, 22 Pick. 97. It is within this latter class that the case at bar must be grouped. The authorities have not concurred entirely in the reasoning which is supposed to support the doctrine upon which these cases proceed. Chancellor Cooper in Macey v. Childress, 2 Tenn. Ch. 438, says they “may be safely rested on the well established doctrine that a surety may by parol limit the extent of his liability as between him and the other parties to the paper.” Mickley v. Stocksleger, 10 Pa. Co. Ct. Rep. 345, distinguishes Nugent v. Wolfe, 111 Pa. St. 471 (56 Am. Rep. 291), in that the latter case “was in no way connected with the original cause of action; he was not a party liable, and it did not appear that he had any personal interest in the judgment on which the plaintiff was the only bail for the stay of — 283 — execution.” Mr. Browne ventures a reason for which, he declares that none other exists so satisfactory or consistent with the spirit of the statute. The reason is alike applicable to the second and third classes above enumerated. The troublesome element in the cases is that by the hypothesis there are or are to be two different persons concurrently liable to the plaintiff to do the same duty. He says: “The implied obligation of the third party exists only by force of and incidental to the special contract between the plaintiff and defendant,” and “that the statute contemplates only obligations of the third party previously existing, or incurred contemporaneously with the defendant’s special promise, or afterwards as the case may be, but always existing or to exist independently of any contract of guaranty between the plaintiff and defendant; an obligation which exists or may exist, whether any contract be made with the plaintiff and defendant or not; not an obligation which exists only as a legal incident of the contract which they have made.” But, seek where you will for a plausible footing upon which to found the obligation so as not to come within the purview of the statute of frauds, the distinction taken in Green v. Cresswell of Thomas v. Cook, that the promisee became likewise bound upon the obligation with the promisor, as cosureties, and for this reason, if not also for the reason upon which the second class is supported, — that it is not an undertaking with the creditor, — the indemnity is not within the statute, whether adequate or not, has taken deep hold in the judicial mind, and the undoubted weight of authority in this country is grounded upon it. In — 284 — deed, the doctrine is even regarded as settled. Mr. Throop, in his treatise on the Validity of Verbal Agreements, § 474, says: “As the result of the conflict of authority upon this question (speaking generally of contracts of indemnity against a surety’s liability) nothing can be regarded as definitely settled, except, perhaps, that, where the promisor and the promisee are about to unite in an instrument as sureties for the third person, the promise to indemnify is not within the statute.” If one cosurety can by a verbal undertaking indemnify another in whole against the obligation of the latter, without suffering the interdiction of the statute, he may also in part, as the greater includes the less; and thus it is that cosureties may by contract, agreement, or understanding between themselves, limit and fix the proportion and extent of their several or correlative liability, and it is competent to establish the agreement by parol. So we conclude that it was competent for the plaintiff and defendant to enter into such a contract or agreement as is set forth in plaintiff’s complaint, and the fact that it is not in writing cannot be taken as an objection against its enforcement. Now as to the question whether, in view of the evidence, the court erred in taking the case from the jury and sustaining the motion for nonsuit. Without intimating any opinion as to the weight and effect to be given to the testimony, that being a matter for the jury to determine, and without recapitulation here, let it suffice to say that we deem the evidence introduced competent and sufficient to go to the jury for their consideration whether or not there was such an agree — 285 — ment entered into between the parties touching their correlative liabilities as plaintiff has alleged by his complaint: Tippin v. Ward, 5 Or. 453; Brown v. Oregon Lumber Company, 24 Or. 317 (33 Pac. 557); Vanbebber v. Plunkett, 26 Or. 562 (27 L. R. A. 811, 38 Pac. 708); Baldwin v. Fleming, 90 Ind. 177. Let an order be entered remanding the case for a new trial. Reversed.