McCord v. Edward Hines Lumber Co.

The following opinion was filed January 31, 1905: Dodge, J. The jury having returned a verdict for plaintiff, judgment for defendant can be justified only if the evidence conclusively establishes that the defendant’s promise was to answer for the debt or default of another, which, by subd. 2, sec. 2307, Stats. 1898, is void if not in writing. This provision comes to us from the original statute of — 512 — frauds, 29 Oar. II, of wbicli it bas been said by an enthusiast that every line was worth a subsidy, and by a cynic that every line has cost a subsidy to interpret. The latter statement has been gaining force as the ingenuity of greed has, through centuries, been strained to escape this apparently plain provision, until its application is now surrounded by such a cloud of decisions as to defy exhaustive examination. In them, as might be expected, will be found reasoning and dicta well calculated to confuse exact lines of demarkation. Nevertheless such lines can be traced with reasonable certainty and distinctness. The promise voided by the statute is one to answer for the debt or default of another. Hence the statute has no application unless there be a primary obligation of some one else, and the promise be to answer for that as such. In other words, the promise must be collateral to and dependent upon the breach of a recognized obligation primarily owed, by another. If such it be, however, it is void unless in writing. There are many dicta and some decisions indicating that this result may be escaped if there is a new consideration for the guaranty, or if such consideration consist of benefit to the guarantor. The statute, however, recognizes no such exception. There must, on general principles, be new consideration for the promise of indemnity in any event to render it valid, written or unwritten; hence to say that the existence of such consideration alone takes the promise out of the statute is to deny the statute any force whatever. 1 Brandt, Suretyship (2d ed.) § 60. Again, there are statements in the cases to support evasion of the statute if the leading object of the promisor is to benefit himself, or if the creditor principally relies on the guarantor. All such statements are misleading. None of such considerations will of themselves prevent the application of the statute if the promise is really to answer for the debt of another. Each of them may, however, serve as evidence in special cases to show that — 513 — the promise is really to pay an original obligation of tbe promisor, to which the statute offers no obstacle, however much such obligation may co-exist with or be measured by the debt of another. The existence of such original obligation will be found on careful analysis to he the time basis of most of the decisions where a new consideration has been given prominence. A few of the cases illustrating the situations in which the undertaking will be considered original, and not merely collateral to and dependent upon the third person’s obligation, are the following: Putney v. Farnham, 27 Wis. 187; Young v. French, 35 Wis. 111; Hoile v. Bailey, 58 Wis. 434, 17 N. W. 322; Lessel v. Zillmer, 105 Wis. 334, 81 N. W. 403. An illustration of the reverse situation, where, although there was a new consideration involving benefit to the promisor, his promise was absolutely collateral — a mere guaranty of the debt of another — and therefore avoided by the statute, is Commercial Nat. Bank v. Smith, 107 Wis. 574, 93 17. W. 766. The parties here negotiated and finally agreed upon a sale from plaintiff and his company to defendant of certain standing timber which the latter desired transformed into saw logs with all possible expedition. It was important that sucb transformation progress during the period of negotiation., examination of title, and arrangement of details. To that end it was necessary that some one make advances. When transfer was finally made at the prices fixed for standing timber, that timber had been advanced toward its next stage of saw logs to the extent of the logging work done in the interim, and was enhanced in value to an amount presumptively in excess of the advances made by plaintiff, and those advances were available as a credit upon the contract price for cutting and hauling the logs, which defendant had agreed to assume. Hence, upon final conveyance by plaintiff and. his company, they transferred by their written contract the tim — 514 — ber, but also tbe addition thereto resulting from, partial transformation into logs, and defendant thus received full and adequate beneficial consideration for a promise to pay for such addition or enhancement in value. The evidence ceir-tainly tends to sujiport the view that, in addition to the timber, defendant in November purchased 'from plaintiff the enhancement of the same which his money had procured; or, in another aspect, purchased his right to a credit upon the railway company’s logging contract to the amount of such advancements, and agreed to pay him a price therefor. This, of course, would be an obviously original promise to pay a price for property purchased by the defendant, and would be in no wise affected by the fact, if it existed, that Colbroth, or any one else, might be indebted to plaintiff for those advances, for it would not necessarily be collateral to, or in any wise dependent upon, either existence of such debt or default therein by Colbroth. Indeed, if such debt existed, the transaction would, in effect, wort a purchase of it by defendant, not a guaranty of it. The promise was in terms, not to pay what Colbroth owed, but to pay plaintiff certain sums because he had advanced them and defendant had the benefit. No reference was made to the fact that Colbroth owed a debt at all, nor was the amount which defendant promised to pay at all dependent on the amount which Colbroth owed. We are convinced that the evidence fully justified the jury in finding that defendant’s promise was an original one to pay a price for something of value which it received from plaintiff and his company. They having so found by their general verdict, the statute of frauds offered no obstacle to its validity. A further test, which is often applied, is whether the thing promised by the defendant is identical with the obligation owed by the third pei’son. If not — if it be to do something different, though it may include some part or the whole of — 515 — the latter’s obligation — it will ordinarily be deemed not a mere promise to answer for the debt of another, but an original undertaking not affected by the statute. Thus, indemnity to a surety upon a debt owed by the third person to a fourth has been held valid because the third person owed no debt to the surety, but merely might, on a contingency, become under obligation to him by implication of law, not to pay the debt, but to reimburse him in case he had to pay, while the defendant’s promise was to protect him against the necessity of paying at all. Another illustration is where the owner of a machine warranted it to work to a certain standard, while the defendant agreed that it should work to the satisfaction of the plaintiff. This distinction, while in some conflict in other jurisdictions, has been fully adopted in Wisconsin. Browne, Stat. Frauds (5th ed.) §§ 161 et seq.; Shook v. Vanmater, 22 Wis. 532; Vogel v. Melms, 31 Wis. 306; Hull v. Brown, 35 Wis. 652. We deem such distinction applicable here, for in no view of the evidence can there be found any obligation’ resting on either Colbroth or the railway company to pay the plaintiff the. amount of his advances. There is no express agreement to repay any part of them on any contingency. The agreement and understanding as stated by McGord, without dispute, was merely that any such advances should be treated as a payment upon the $3.50 per M. which he was bound to pay to the railway company for completed cutting and hauling of the logs. If there was any implied agreement of reimbursement, it went no further than to make plaintiff good in the ultimate contingency of his not receiving enough logs under that contract to satisfy his advances, or, perhaps, upon abandonment of the logging contract. Clearly he could not, at the time of his transaction with defendant, demand or sue for the amount of those advances as against Colbroth. Hence the promise of defendant to pay him that amount absolutely and without contingency — 516 — was in no wise identical with any debt or obligation owing from any third person, and on the authority of the above-cited cases is not within the statute pf frauds. Eor the reasons stated we must conclude that the action of the trial court in ordering and entering judgment for defendant was erroneous. By the Court. — Judgment reversed, and cause remanded with directions to enter judgment for plaintiff upon the verdict. Upon a motion for a rehearing there was a brief by Solon L. Perrin, attorney, and B. M. Bashford, of counsel, for the respondent. In reply to such motion there was a brief by Luse, Powell> deForest •& Luse, for the appellant. The motion was denied April 5, 1905.