Maxey v. Rideout

QUARLES, District Judge (after stating the facts as above). The theory .upon which the plea of abatement rests is that the action has been prematurely brought, that the promise of the defendant was collateral and did not amount to a guarantee against liability, and that no recovery can be had until the judgment or some part thereof has been paid by'the plaintiff. It was conceded in the argument by plaintiff’s counsel that, if the defendant by virtue of the written agreement became a surety, the plea should be sustained. But it was vigorously contended that this was an original engagement on the part of Rideout, based upon a good consideration, which rendered him liable to suit when he failed to comply with his written- agreement to furnish the necessary means to enable the railway company to purchase the plaintiff’s lands. The sole question, therefore, to be determined is: What was the legal relationship between the plaintiff and the defendant, growing out of the written agreement upon which this action is brought? It is important at the outset to ascertain when this written agreement was made. It bears no date. The complaint alleges that it was entered into September 21, 1905. This is an evident mistake, because the contract must have been made before the organization of the corporation. Upon the argument counsel for both parties agreed that the true date of this preliminary contract was August 16, 1905, more than a month before the organization. At this early date the scheme of the promoters seems to have been nebulous. Their anxiety to divide the profits of the enterprise amongst themselves seemed uppermost. As there were no assets in sight, some ready money was necessary to. defray expenses and to acquire certain tracts of land, which might be capitalized and which might’ furnish a lawful basis for a bond issue which was relied upon to reimburse all advancements made by the [175] promoters. The defendant’s promise to contribute to this fund must be construed with reference to those facts. It was explicitly stated in the memorandum that all such money advanced should be repaid to the defendant upon the organization of the corporation. It was further provided that such primary fund was to be expended by “us” (the promoters), or by the corporation. Whether under any construction of this written agreement defendant could be called upon to make any advancements of funds after the corporation was organized is a question going to the merits, and not raised by the plea under consideration. It will be observed that the written agreement does not create any personal obligation between the plaintiff and the defendant, but is essentially an agreement on the part of the defendant to advance funds to the embryo railway company as a preliminary step to' organization. It further appears that about the 21st of September, 1905, the railway company was organized under the Michigan statute, and thereupon executed certain promissory notes to the plaintiff, aggregating $7,900, in exchange for his warranty deed to a certain tract of timber land. This would seem to indicate change in the programme. Instead of a preliminary purchase by the-promoters, the railway company was first organized, and purchases made in its name, and promissory notes given by it to the vendors. It appears that there were certain outstanding liens upon this tract of land, which plaintiff by his warranty deed obligated himself to remove, so- as to furnish a clear title. In order to perfect this title the plaintiff took one of the promissory notes received by him from the railway company, and indorsed the same in blank, and had the same discounted at the National Union Bank of Oshkosh, of which bank defendant was president. The proceeds of such discount were applied to the extinguishment.of such liens on the plaintiff’s lands. Plaintiff avers that he indorsed this note as an accommodation for the defendant; but, as the indorsement was made without condition or qualification, it is difficult to understand the meaning of this averment. Certain it is that the defendant was no party to the note. The theory of the complaint is that these notes were taken by the plaintiff, and the $5,000 note was discounted by him upon the strength of defendant’s engagement in the written contract to advance a sufficient sum to enable the railway company to pay for the lands, etc. Conceding for the purposes of the argument that the agreement of the defendant survived the organization of the railway company and was still available when the plaintiff discounted his $5,000 note, upon the legal theory that the plaintiff may rely upon the promise made by the defendant to the railway company if made for his benefit, still I am constrained to hold that the entire scheme evidenced by the written contract was to create an indemnity fund for the benefit of the vendors, and that it cannot be said to be an indemnity against liability. Defendant has made no promise to pay this $5,000 note, and his written agreement has no reference to the discount of the same or the extinguishment of liens upon the real estate. Plaintiff accepted the railway company as the primary obligor, and can only resort to the contract when he shall have sustained some damages. He has not paid [176] the judgment, or any part thereof, and therefore the action is prematurely brought. The Supreme Court of Wisconsin has laid down the law on this subject in the following cases: Thompson v. Taylor, 30 Wis. 68; Selleck v. Griswold, 57 Wis. 291, 15 N. W. 151; Barth v. Graf, 101 Wis. 28, 76 N. W. 1100; Lyle v. McCormick Harvesting Mach. Co., 108 Wis. 81, 84 N. W. 18, 51 L. R. A. 906. It is'uiinecessary to refer to the numerous decisions of other states where the same definition is adhered to. Under this construction of the complaint, the plea in abatement should be sustained. There is, however, an averment in the complaint which, under one construction, would give a different complexion to the legal question raised by the plea: “That it was then and. there agreed between said plaintiff and said defendant Rideout that he and said railway company should pay or secure and furnish to said plaintiff a sufficient amount in cash out of said purchase price of $79,205 to enable the plaintiff to pay and discharge said claim and thus perfect his title.” This averment may be construed to set up a distinct and separate oral promise on the part of the defendant, made subsequent to the written agreement. From the brief and argument of plaintiff’s counsel we are led to believe that the above averment was intended as the plaintiff’s interpretation of the written agreement. In such brief plaintiff’s. counsel announce “that this suit is based squarely upon an express- written contract in the nature of an original obligation,” “and no suggestion is anywhere made that the plaintiff relies upon a subsequent oral promise. The court, however, is not concluded by the construction of counsel, but must impose its own interpretation upon the averments of the complaint. If we are to read this averment of the complaint as setting up a later parol engagement by the defendant to furnish the plaintiff with the necessary means to perfect his title, such obligation, although by parol, may be original in nature, although the railway company was primarily liable. The interest that defendant had in the success of the scheme, and which involved for him $100,000 of paid-up stock, may furnish a sufficient consideration, in which event the case would not fall within the statute of frauds, and should be ruled by Emerson v. Slater, 22 How. 28, 16 L. Ed. 360, Davis v. Patrick, 141 U. S. 479, 12 Sup. Ct. 58, 35 L. Ed. 826, and Choate v. Hoogstraat, 105 Fed. 713, 46 C. C. A. 174. Under these circumstances, the court being in doubt as to the true construction and interpretation of the complaint, the better course would seem to be to overrule the plea and allow the parties to be heard upon the merits, so that the court may have a clearer understanding of the facts than can be gathered from ambiguous averments of the pleadings. For these reasons, the plea in abatement will be overruled.