Wilson v. Ray

Worden, J. Complaint by Wilson against Ray “that on or about the first day of June, 1852, the plaintiff and one Lawrence M. Vance were engaged to perform a large amount of work, and to furnish a large amount of materials for the construction of what is known as the Indianapolis and Cincinnati railroad, in the doing of which work, and the furnishing of which materials, and in order to pay workmen, and furnishers for the same, it became necessary that, in the progress thereof, the plaintiff should raise a large sum of money, to-wit, 300,000 dollars. The plaintiff further says that by the contract for said work and materials with the company to whom said road belonged, they, the plaintiff and said Vance, were to receive the greater portion of their pay for said work and materials in the bonds of said company at 75 cents on the dollar, and did receive therefor, of said bonds, to the amount of 350,000 dollars nominally. The plaintiff further says, that in order to raise the money first aforesaid, it became necessary to borrow the same by the creation of commercial paper, from time to time, as the same might be needed, with good indorsers, in view of which necessity the said Vance procured one Ilervey Bates as his indorser, accept- or, and drawer of said commercial paper, on terms then agreed on between them; and the plaintiff, in order to procure an acceptor, drawer, and indorser also as aforesaid, then and there entered into the following agreement with the defendant: The plaintiff then and there promised the defendant that if the defendant would draw, accept, and indorse said commercial paper as the same might be, from time to time, needed, along with said Bates, the plaintiff would pay to said defendant one-half of the amount which the plaintiff should realize on the said bonds over and above 75 cents on each dollar of said bonds, provided that — 3 — if, on said bonds, he should not realize 75 cents to the dollar, on disposal of them, the defendant would pay to the plaintiff one-half of the loss sustained by the plaintiff by reason of such disposal of them under 75 cents on the dollar; and the defendant, then and there, in consideration of said promise by the plaintiff, promised to him to draw, accept, and indorse for him as aforesaid, and to pay the plaintiff a sum of money equal to one-half of his loss on said bonds, if on the same he should realize less than 75 cents on the dollar. And the plaintiff says that the defendant did so draw, accept, and indorse for him as aforesaid. And he avers that, of said 350,000 dollars of bonds of said company, one-half, to-wit, 175,000 dollars thereof, was then and there, and until the same was disposed of as hereinafter mentioned, the property of and share falling to the plaintiff. The plaintiff further says that said bonds could not be and were not sold, or in any manner disposed of at a rate equal to 75 cents on the dollar, but on the contrary they were, with the defendant’s knowledge and consent, disposed of afterwards at much less than 75 cents on the dollar, to-wit, at 60 cents on the dollar, and that the plaintiff’s loss on such disposal thereof was, and is, 25,000 dollars; of all of which the defendant then and there had notice; wherefore,” &c. To this complaint the defendant answered, amongst other things, as follows, viz.: “That the said supposed agreement upon which this suit is brought was made and entered into on'the 15th day of June, 1852; and that said contract between The Indianapolis and Cincinnati Railroad Company and said plaintiff’ and said Vance, under which the said bonds named in the complaint were to be issued and paid to said plaintiff and' Vance, was entered into on the 31st day of January, 1852, whereby they, the said plaintiff and said Vance, were to complete the work embraced in their said contract, and fully comply with their part of said contract by the first of October, 1853, and that according to the terms and stipulations of the last-named contract, as well as by the terms and stipulations and recitals of the first4 named agreement, the said plaintiff and the said Vance bound and obliged themselves to hold the said bonds, and to keep them out of the money market, and not to sell or finally dispose of them for the whole period of, and until the expiration of sixteen months from the first day of April, 1852, and that the said railroad company should have the right, and could, by giving thirty days’ notice to the said Vance and Wilson, receive back from them the whole or any part of said bonds, by paying in money therefor 85 cents on the dollar at the city of New York; provided, however, that such demand to redeem said bonds should be made within sixteen months from the first day of April, 1852, and provided also that said Vance and Wilson should have the right, when such demand was made, to take and receive stock in said company, at par, for the full amount and face of said bonds, which bonds were to be paid to said Vance and said plaintiff by The Indianapolis and Cincinnati Railroad Company, within ten days after notice in writing from the engineer in charge of the line that the work contemplated in said contract had been fully completed; and the said plaintiff and said Vance, in and by the agreement first herein above mentioned, further agreed with the said Bates and said defendant that there should be a mutual and equal dividend between the said plaintiff, said Vamce, said Bates, and said defendant, either of advance or loss on said bonds so to be received of said company under their said contract with said company, in the final disposal of said bonds, which disposal should be only made under the concurrent disposal of each of said parties. And the defendant says that the said supposed agreement and promise of said defendant upon which this suit is brought was not by its terms to be performed within one year from the time of making the same, and could not be performed within one year; and the defendant avers that the said supposed agreement was not in writing signed by the defendant, nor by any person by him lawfully authorized, and so the defendant says that said agreement was and is void.” To this paragraph the plaintiff demurred, assigning for — 5 — cause that it does not contain facts sufficient to constitute a defense, and that it appears from the paragraph that the contract might have been performed within a year from the making thereof. The demurrer was overruled, and plaintiff excepted. The plaintiff then replied as follows, viz.: “ That at the time of the maldng of the contract herein sued on, the defendant was a director of the railroad company mentioned in the declaration, and also cashier of the State Bank of Indiana, from which bank, or some of its branches, it was then, by the parties to said contract, contemplated that the money (or a considerable portion of it) to be raised under said contract as stated in the complaint, should be borrowed. And the plaintiff says that the said Ray, for the fraudulent and wrongful purpose of concealing from said company, and from said bank and its branches, his said interest in said bonds, and his said contract, and his said connection with the construction of said road, as stated in the complaint, specially requested the plaintiff that the contract herein sued on should not be reduced to writing and signed by the said Ray; and that for said causes alone, and on said request only, said contract was not reduced to writing and signed by the defendant; of which fraudulent and wrongful purpose the plaintiff was then ignorant.” A demurrer to this replication was sustained, to which ruling exception was also taken. On the plaintiff failing and refusing to make further reply to the defendant’s answer, final judgment was rendered for the defendant, and the plaintiff appeals to this Court. He assigns three errors— 1: In overruling his demurrer to the answer. 2. In sustaining the defendant’s demurrer to his replication, and that without any judgment of respondeat ouster'. 3. In rendering judgment to the effect that the plaintiff take nothing by his writ, and that the defendant recover of him his costs. Against the ruling of the Court below on the demurrer — 6 — to the defendant’s answer, the plaintiff assumes three positions: 1. That the contract was executed, and not merely executory, and therefore not within the statute of frauds. 2. That it might have been performed within the year; and, 3. That it was a contract of partnership between the parties, and not necessary to be reduced to writing. The statute in force at the time the contract was entered into provides that “ No action shall be brought upon any agreement that is not to be performed within one year from the making thereof, unless the promise, contract, or agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized,” &c. R. S. 1843, p. 589, § 1. The provision is reenacted in the same language in the code of 1852. 1 R. S. 1852, p. 299, § 1. It is drawn from the English statute of Charles II., and substantially prevails in most, if not all, the states in the Union; hence, the decisions in England and the other states, under it, will throw much light upon, if not definitely settle, the questions presented. The first proposition we think is not true in point of fact. We do not regard the contract as being executed, but as executory in its character. The promises were mutual, and dependent one upon the other for a consideration. The plaintiff, in consideration of the defendant’s promise, promised the defendant one-half of what he should realize on the bonds over 75 cents on the dollar; and the defendant, in consideration of the plaintiff’s promise, promised to become drawer, acceptor, and indorser, &e., for the plaintiff, and to make up to the plaintiff one-half of the loss on the bonds, should they not bring the 75 cents on the dollar. This contract when made was purely executory. No consideration passed from one to the other. The consideration of the promise of each, was the promise of the other. — 7 — This being the case, we shall not inquire whether an agreement based upon a past or executed consideration is, or is not, within the statute. The second position assumed requires more examination. We think it is established that where no time is fixed for the performance of the contract, or where it is to be performed by a certain day (not precluding the right to perform sooner), or where the performance depends upon a contingency which may or may not happen within a year, the contract is not within the statute. On the other hand, where, by the terms of the contract, it is not to be performed within the year; or where it cannot be performed within the year according to the intent and understanding of the parties as evidenced by the contract, it is within the statute. A late writer deduces from the authorities the following rule: “ The result seems to be that the statute does not mean to include an agreement which is simply not likely to be performed, nor yet one which is simply not expected to be performed, but that it means to include any agreement which, fairly and reasonably inter- - preted, does not admit of a valid execution within the space of a year from the making.” Browne on Stat. of Frauds, § 273. At § 283, the same author remarks “that where the manifest intent and understanding of the parties are that the contract shall -not be executed within the year, the mere fact that it is possible that the thing agreed to be done may be done within the year, will not prevent the statute from applying. Physical possibility is not what is meant, when it is said that if a verbal contract may be performed within the year, it is binding. Or to speak exactly, it is not enough that the thing stipulated may be accomplished in a less time, but such accomplishment must be an execution of the contract according to the understanding of the parties.” See, also, Boydell v. Drummond, 11 East, 142; Herrin v. Butters, 20 Maine R. 119. It appears from the answer in the case at bar, that the plaintiff had agreed with the railroad company not to put — 8 — the bonds into market, nor sell or dispose of them, until the expiration of sixteen months from the first day of April, 1852, more than a year after the making of the contract between the plaintiff and defendant. It further appears that this stipulation also entered into and formed a part of the contract between the plaintiff and defendant. The time was fixed by the express terms of the contract, within which the defendant could not become liable to pay any loss on the sale of the bonds. They were not to be sold until after the expiration of more than a year, and this stipulation being made a part of the contract between the plaintiff and defendant, was as binding as any other part of it. This is a substantial part of the contract. There might have been very strong reasons of a financial nature for not putting the bonds in market sooner, and the defendant might have been very unwilling to stipulate to bear a loss on the sale of them if they were to be sold before the time specified. By the terms of the agreement .the defendant was not liable for any loss until the bonds were sold, and they could not have been sold until after the expiration of more than a year; hence, it is clear that the part of the agreement sued on was not to be performed within the year. But it is insisted that the contract might have been performed within the year, notwithstanding these stipulations; that the road might have been completed, and the bonds issued to Wilson and Vance, and then the company might, before the expiration of the year, have elected to take them up at 85 cents on the dollar, in which event, the defendant would have been entitled to his share of the gain, although the year had not expired. Admitting that all this might have been done, it is not perceived how it would take the stipulation of the defendant sued upon out of the statute. The state of things supposed would bring about the contingency on which the plaintiff would, by the stipulations of the contract, be liable to the defendant; but the contingency on which the defendant was to be liable to the plaintiff, could not, by the terms of the contract, happen within the year. If the company took up their bonds at — 9 — 85 cents on the dollar, the defendant, of course, was not liable. If Wilson and Vance choose to take stock in the company instead of money, as specified in the contract, the defendant was not liable. In no possible' event was he liable but upon a sale of the bonds after the time limited, and a failure to realize the amount specified. _ We are of opinion that where the agreement of the defendant upon which suit is brought, is not, in any event, to be performed within a year, it is within the statute, although there may be other stipulations providing for contingencies that would make the plaintiff liable to the defendant within a year, and release the defendant from liability altogether. Agreements not to be performed within a year, are within the statute, notwithstanding' a contingency may be provided for that may put an end to them within that period. Browne on Stat. of Frauds, § 281. See, also, Harris v. Porter, 2 Harring. 27. The case at bar is very analogous to that of Lapham v. Whipple, 8 Met. 59. There A. sold to B. an interest in a patent right for a sum of money paid down by B., and made an oral agreement with B. to repay him said sum if he, B., should not, within three years, realize the same out of the profits of the patent right. The contract was held to be within the statute; that the terms of it indicated that it was not to be performed within a year; that the defendant was not to perform unless the profits for the entire three years failed to yield the sum in question, which, of course, could not be ascertained until the expiration of the three years. So, here, the defendant’s stipulation was to pay a share of the loss on the bonds, if a loss should accrue upon the sale of them after the expiration of the time limited, being more than a year from the making of the contract. A sale of the bonds before the time limited would not, by the terms of the contract, involve the defendant in any liability to pay, although they should be sold at a loss. Lower v. Winters, 7 Cow. 263, was this: The plaintiff sold to the defendant his improvements made on certain land, in February, 1824, to be paid for in one year from the — 10 — ensuing March. It was held that the improvements were no “interest in land,” being merely another name for work and labor bestowed upon it, but that the agreement to pay was void, as not to be performed in a year; that payment at a day specified, precludes the idea of payment before the day. A promise to pay money after the expiration of a year is within the statute, as much as a promise to do any other act. Browne on Stat. of Frauds, § 290. In Donellan v. Read, 3 Barn, and Adol. 899, a doctrine was held that, perhaps, is not fully established in England, and is questioned by some of the Courts of this country. There a landlord who had demised certain premises for a term of .years at ¿650 a year, agreed with his tenant to lay out ¿650 in making certain improvements upon them, the tenant agreeing to pay an increased rent of £5 a year during the remainder of the term, fifteen years. The landlord having done the work within a year, it was held that he might recover arrears of the ¿65 a year against the tenant, though the agreement was not in writing. Litteedale, J., in delivering the opinion of the Court, said: “As to the contract not being to be performed within the year, we think that, as the contract was entirely executed on one side within the year; and as it was the intention of the parties, founded on a reasonable expectation that it should be so, the statute of frauds does not extend to such a case. In a case of a parol sale of goods, it often happens that they are not to be paid for until after the expiration of a longer period of time than a year, and surely the law would not sanction a defense on that ground, when the buyer had had the full benefit of the goods on his part.” The doctrine of the above case, as we understand it, is that where the contract has been entirely executed on one side within the year, in a case where it was the intention of the parties, founded on a reasonable expectation, that it should be so executed, the statute does not apply, although performance on the other side was not to take place within a year. In Broadwell v. Getman, 2 Denio, 87, Bearsdley, J., de — 11 — livering the opinion of the Court, and remarking upon the case of Donellan v. Read, 'supra, said, “But I would not be understood as yielding my assent to the principle stated, It seems to me in plain violation of the statute: * * * The agreement is entire, and if it cannot be executed fully on both sides within the year, I think it is void. What difference does it make that one party can, while the other cannot, complete the contract within the year? Such an agreement is not in terms excepted from the statute, and the reason for the enactment applies to it with full force.” We do not, however, in this opinion, wish to approve or disapprove of the case of Donellan v. Read, as it is not necessary that we should do so.' The case at bar is distinguishable from it. We may remark, however, that in such cases the party would not be without remedy, although no action would lie on the contract, for he may maintain a general indebitatus assumpsit against the party who refuses to proceed further under the contract, and thus recover a compensation for what has been advanced and received upon it. Vide Broadwell v. Getman, supra, and authorities there cited. It is said that, “ Where a verbal contract has been executed on one side by the conveyance of property, or the performance of services, the proper form of action to recover the value of the property or services, is upon the implied promise arising from the plaintiff’s performance; implied promises not being embraced by the statute.” Browne on Stat. of Frauds, § 124, et seq. In the case before us, there has been no full performance on either side. To be sure, the defendant has performed that part of the contract by which he was bound to indorse, &c., but beyond this there has been no performance on either side. The plaintiff has done nothing ‘towards performing his part of the contract. The contingency has not arisen upon which he was to perform. The part to be performed by him, was to pay to defendant a portion of the gain on the bonds. There has been no gain and he has paid nothing. He has not parted with anything, nor has the defendant received anything. Admitting it to he true that the contract might have — 12 — been performed on the part of the plaintiff, within the year, by the railroad company taking up their bonds at 85 cents on the dollar, and the plaintiff paying to the defendant his share of the gain; yet nothing of this kind has been done. Indeed, this contract is of such a character that the facts which would render one party liable to pay the other, would release the other from any liability to pay. The fact that there has been no performance on the part of the plaintiff, he having paid nothing, and the defendant having received nothing, very clearly distinguishes this case from Donellan v. Read, supra. The remarks of the Court in that case, would be wholly inapplicable to this. This case is much more like Sweet v. Lee, decided some nine years after. (3 Man. and Gr. 452.) The plaintiff, a publisher, sued the defendant upon an agreement to prepare a law book for publication, in consideration of which the defendant was to receive ¿£80 a year for five years, and ¿£60 a year for the remainder of his life. The agreement was held to be within the statute. In argument, it was insisted that the work might have been published during the year, but Maulé, J., remarked that although that might be, the annuity could not be paid within that time. Donellan v. Read was pressed upon the consideration of the Court, but they held, nevertheless, that the case was within the statute. This case establishes the position that, although the contract may be performed on one side within the year, yet if it cannot on the other, it is within the statute. On the point that the contract was one of partnership between the parties, and, therefore, not necessary to be reduced to writing, we may remark that we have been referred to no authorities which sustain that position, and we know of none. A contract of partnership concerning an interest in lands, must be in writing. Story on Partnership, § 83. Admitting that the contract amounted to one of partnership between the parties (a point which we by no means decide), still it is not perceived why that should take the case out of the statute. The language of the statute covers contracts of partnership as well as any — 13 — other, and if they are not to be performed within a- year, we think no action can be maintained upon them unless they are in writing. The Court below, in our judgment, committed no error in overruling the demurrer to the answer. Is the replication valid? We are of opinion that it is not. It cannot readily be perceived how a fraudulent refusal to put the contract in writing can have the effect of putting it in writing. The object of the statute was to require written evidence of the terms of the contract, and thereby to prevent frauds and perjuries in establishing them by parol. The construction sought would not only defeat the object of the statute by permitting parol evidence of the contract, but would open the door to frauds and perjuries still wider, by permitting parol evidence of the fraud charged in refusing to put the contract in writing. Besides this, the fraud charged was not committed upon the plaintiff, but upon the railroad company and the bank. This certainly could not injure the plaintiff. The demurrer to the replication was properly sustained. The remaining error relates to the manner of rendering judgment. The statute provides that “the judgment upon overruling a demurrer, shall be that the party plead over. * * * If a party fail to plead after the demurrer is overruled, judgment shall be rendered against him as upon a default.” 2 R. S. p. 123. But this statute is not applicable to the case, as the demurrer was sustained and not overruled. No error in this respect has been pointed out in the brief of counsel, and we see none. On sustaining the demurrer to the plaintiff’s replication, and on the plaintiff failing and refusing to make further reply, it certainly was correct to render final judgment for the defendant. It perhaps should be observed that a demurrer was filed to the complaint, and overruled. Counsel on both sides, in very elaborate briefs, have discussed the validity of the contract, the appellee claiming that it is void on other grounds than the statute of frauds. But we have not felt called upon to determine the questions thus raised, as we — 14 — think they do not legitimately arise in the record. The judgment of the Court below upon the demurrers to the answer and replication, in our opinion, was right, and back of that we do not choose to go, as the judgment must be the same, whether the contract should be held good or bad in other respects. O. H. Smith (1), D. M’Donald, A. G. Porter (2), A. A. Hammond, J. E. McDonald, and A. L. Roache (3), for the appellant. J. Morrison, C. A. Ray, and H O'Neal, for the appellee (4). Per Curiam. The judgment is affirmed with costs.