McGowan Commercial Co. v. Midland Coal & Lumber Co.

108 P. 655, 41 Mont. 211, 1910 Mont. LEXIS 59

• Court: Montana Supreme Court
• Decided: April 25, 1910
• Docket: No. 2,814
• Status: Published

Opinion

MR. JUSTICE HOLLOWAY

delivered the opinion of the-court.

This action was brought by the McGowan Commercial Company, a corporation, against the Midland Coal and Lumber Company, a corporation, to recover the balance dne on an account for goods, wares, and merchandise alleged to have been sold by the plaintiff to the defendant, and, at the special instance and request of defendant, delivered to D. J. Gibson. The answer is in effect a general denial of the allegations of the complaint. At the close of plaintiff’s ease the defendant moved for a nonsuit, and the motion was granted. Thereafter plaintiff moved for a new trial, and this motion was likewise granted. From the order granting a new trial, the defendant appeals.

There is not any dispute or inconsistency in the facts as they appear from the record. Those facts are: In January, 1908, the defendant company was engaged in business at Plains, Mon-. tana. It had purchased the logs from certain lands near there,, and was anxious to have them removed, and to that end contracted with Gibson to do the work. In order to carry out his. contract, Gibson required groceries and other provisions to. supply his men engaged in the work, and, being without suffi-' cient ready means, it became necessary for him to obtain credit.. He applied for credit to the plaintiff company, which was engaged in the general mercantile business at Plains, and the - officers of that company, after investigation, determined that Gibson was°not financially responsible; that he would not be able to make any profit from his contract, and they therefore declined to extend credit to him. E. B. Clark, the president, and general manager of the defendant company, was informed of this conclusion, and the following took place: An officer of' the plaintiff company said to Clark: “Mr. Gibson has applied to us for credit to carry on his logging operations, and we have • decided we cannot give him any credit, as we do not think him good,” to which Mr. Clark said: “You don’t; am I good?”' “I [McGowan] said, ‘You certainly are,’ and he said: ‘All right; you let Gibson have what he requires—what he needs— ■ and I will see that it is paid, and you keep our office notified from time to time what the amount is.’ ” An officer of the ■ plaintiff company then sought out Gibson, and induced him to trade with the plaintiff, and during January, February, March, o and April, 1908, Gibson secured goods from the plaintiff to the amount of $769.05. These goods were charged on the books of the plaintiff to Gibson, and upon the first of every month an itemized bill of the goods delivered to Gibson during the preceding month was sent to him, and the defendant company was notified of the amount of goods thus delivered to Gibson. Upon April 13, the bookkeeper of the defendant company gave to the plaintiff this notice: “You will please not give any more goods to Mr. Gibson under the guarantee of Mr. E. B. Clark.” After that date there were no more goods furnished Gibson by the plaintiff on that account. About May 19, E. B. Clark came to the plaintiff’s store and paid $300 on Gibson’s account, and stated that, as soon as the logs’ which Gibson had delivered were scaled, “I will see that you get the balance of the money.” In August following the plaintiff wrote a letter to the defendant company, at its office in Miles City, in which attention is called to the balance due on the account for goods delivered to Gibson, which letter concludes as follows:

“Kindly let us hear from you at your earliest convenience as we presume Mr. Clark had neglected to inform Mrs. Clark, who handles your business here, that he had guaranteed this account to both the writer and our Mr. McGowan. *

“Yours very truly,

“McGowan Commercial Company,

“Per C. H. Rittenour, Secy.”

The testimony further tends to show that the plaintiff did not rely upon, or look to, Gibson for payment for the goods thus delivered, but extended credit solely upon the assurance given by the defendant, through Clark, and looked to the defendant alone for payment. It further appears that after Gibson had completed his logging contract, the plaintiff company did extend credit to him on his own responsibility, to the extent of about $60. The defendant company having refused to pay the balance of the first account, this action was brought. The other facts will appear later.

Counsel for appellant contends that the court erred in granting a new trial (1) because the evidence is insufficient to show any authority in Clark to make a contract, on behalf of the defendant company, to answer for the debt of Gibson; (2) that the evidence shows that, if any promise was made by Clark on behalf of the defendant, it was to answer for the debt, default, or miscarriage of Gibson, and, not being in writing, it was void; and (3) that there is a fatal variance between the allegations of the complaint and the proof, in this: That the complaint charges upon an original obligation of the defendant company, whereas the evidence shows a collateral undertaking, if any.

1. As we view this evidence, it is wholly immaterial on this appeal whether Clark had authority to make a contract to pay the debt of Gibson, since the contract, if of that character, is void, not because of the lack of authority in Clark to make it, but because it was not in writing, and falls within the inhibition of section 5017, Revised Codes. If, however, the agreement made between Clark and the officers of the plaintiff company amounted to an original promise, then the question might properly arise: Whose promise was it—the defendant company’s or Clark’s individual promise? If it was an original promise, and Clark intended to bind the defendant company, and not himself individually, we think there is a presumption that he had the authority to do so, arising from the fact of his employment as president and general manager of the defendant company, and the apparent interest which the company had in seeing Gibson so situated that he could carry out his contract. (Story on Agency, sec. 56.) But whether Clark intended to bind himself or the defendant company was a question of fact for the jury to determine from all that was said and done and from all other surrounding facts and circumstances. (Gerber v. Stuart, 1 Mont. 172; 1 Am. & Eng. Ency. of Law, 2d ed., 1121; 31 Cyc. 1553; 2 Ency. of L. & P. 920-923.)

2. Assuming that Clark intended to bind the defendant company by his declaration to the officers of the plaintiff, the appellant contends that the question, Does Clark’s statement amount to an original promise to pay for the goods, or merely to a promise to answer for Gibson’s debt? is one of law, and does not involve any element of fact for a jury’s consideration. The general rule applicable in such cases is: “Where the question whether the promise was original or collateral depends alone upon its terms, and the language used is established by undisputed testimony, such question is one of law for the court. But the nature of the promise is usually to be determined by the jury as a question of fact, for it may appear that a promise, original in form, was in fact made and intended as collateral, '* * * or a promise to be ‘responsible’ may be found to be collateral, or promises deemed prima facie collateral may be adjudged original.” (29 Am. & Eng. Ency. of Law, 2d ed., 908.)

If this record presented only the language used by Clark to the officers of the plaintiff company, stripped of any attending facts or circumstances which could possibly throw light upon the intention of the parties at the time, then the only question presented would be one of law. But it is a well-recognized rule that, whenever the language of the promisor was used in connection with other facts and circumstances which can fairly be said to illustrate the language employed, or to throw light upon the intention of the parties at the time the promise was made, then it becomes a question of fact for a jury’s determination, under proper instructions, whether the promise was original, or collateral to the promise of a third person. If the promise was original, then the statute of frauds is not applicable ; but, if collateral, then it is void unless in writing. In Smith on the Law of Frauds, section 319, it is said: ‘ ‘ The subject matter of the promise, the relationship of the parties to the transaction, the language used, the surrounding facts and circumstances, and the intention of the parties as interpreted by their acts in recognition of the promise, its fulfillment, etc., are important elements in determining whether the promise is collateral and subject to the statute, or original and not subject to it.”

To attempt to designate all the facts and circumstances which might be the subject of legitimate inquiry in determining the character of a promise thus made would be a hopeless task. Reference to some of them may be had. It is always proper to inquire whether the promisor had any immediate pecuniary interest in the transaction between the promisee and the person for whose benefit the promise was made. (Davis v. Patrick, 141 U. S. 479, 12 Sup. Ct. 58, 35 L. Ed. 826.) This court has said: “Wherever the main purpose and object of the promise is not to answer for another, but to subserve some purpose of his [the promisor’s] own, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing the liability of-another.” (Carothers v. Connolly, 1 Mont. 433.) When the statute of frauds is invoked, the question of primary importance is: To whom was the credit given? (20 Cyc. 180.) It is the province of the jury to determine to whom the credit was given, and their duty, in so doing, to consider the extent of the undertaking, the expression used, and the circumstances of the case. (Boykin v. Dohlonde, 37 Ala. 577.) Whenever from the language employed by the promisor reasonable men might draw different conclusions or inferences, then the intention of the parties at the time the promise was made becomes a subject of legitimate inquiry. “It is often difficult to determine from the mere words in which a promise is made whether an undertaking is collateral to the engagement or liability of a third person, or an entirely independent and original undertaking. In such eases courts must rely on the circumstances. of each particular case and its general features, in order to ascertain the intent of the parties and how they viewed it, when it is doubtful whether it was a contract of suretyship or guaranty or an original undertaking.” (20 Cyc. 164.) As said by the supreme court of the United States in Davis v. Patrick, above: “Counsel for Davis place stress on the form of expression attributed by Patrick to Davis, to-wit: ‘I will be personally responsible; I will see you paid’—and ‘contends that the import of such language is that of a collateral promise. There is force in this contention, as it implies that someone else was also bound; but the real character of a promise does not depend altogether upon the form of expression, but largely on the situation of the parties, and the question always is what the parties mutually understood by the language, whether they understood it to be a collateral or a direct promise.” “It is for the jury to find what the real substance and spirit of the undertaking between the parties was.” (Wood on Statute of Frauds, see. 98.)

Some of the facts which the evidence in this case tends to prove, and from which a jury might infer a primary liability on the part of the defendant company, are: (a) Gibson needed credit, which he sought from the plaintiff company, in order to carry out his contract with the defendant company, and credit was refused him. With knowledge of this fact, the defendant made the promise. For Gibson to get the goods would apparently benefit the defendant company, in that Gibson would thereby be enabled to carry out his contract, and the defendant would get the logs delivered at once, a matter in which it appears to have been concerned, (b) The credit was given to the defendant company exclusively, (c) The defendant paid $300 on Gibson’s account. And (d) defendant asked to be informed of the amount of goods delivered to Gibson. Some of the facts from which a contrary inference might be drawn are: (a) The goods were charged on the plaintiff’s books to Gibson, and an itemized statement sent to Gibson every month; (b) the plaintiff wrote to defendant in August that Clark, had guaranteed Gibson’s account; and (c) after Gibson’s contract with defendant company expired, plaintiff extended credit to Gibson on his own responsibility. But all of these facts and circumstances are subject to explanation, and some of them at least are explained. For instance, in explanation of the charge on the books to Gibson, it is said that the defendant company was purchasing goods from plaintiff on credit during the. same time that goods were delivered to Gibson, and that the goods so delivered to Gibson were charged to him in order to prevent confusing that account with the account of the defendant company for goods which it purchased for its own immediate use, and in order that plaintiff might comply with Clark’s demand that the defendant company be kept informed of the amount of goods delivered to Gibson. The rule applicable in such a ease is well stated, as follows: “Evidence that the goods sold were charged to the person to whom they were delivered strongly tends to show that the vendor gave credit to him, and relied upon him for payment, and therefore that the promise of another to be answerable for the debt was at most a collateral undertaking. However, this evidence is not conclusive, but is open to explanation, and the weight of it is for the jury. ” (20 Cyc. 183.) Treating of this particular phase of the ease under similar circumstances, the supreme court of Oregon, in Mackey v. Smith, 21 Or. 598, 28 Pac. 974, said: “It is enough to say that it was to prevent confounding the accounts, as already explained, that the charges were thus made on the books. With this explanatory evidence, the referee, who stands in the place of the jury, was satisfied; and, as it was proper evidence to be considered by him, it is not for us to weigh it or revise his findings.”

It is urged by appellant that the evidence shows that at the time Clark is alleged to have made this promise, Gibson was getting goods from another firm in Plains; and this is true, but it does not appear to what extent Gibson was dealing with Peterson & Kruger, or whether he was paying cash or obtaining credit.

It is likewise urged that the evidence is not sufficient to show that the defendant company had such an immediate pecuniary interest in the transaction between Gibson and the plaintiff as would furnish a consideration for defendant’s promise. But we think this is a question of fact for the jury. The evidence tends to show that the defendant company had a pecuniary interest in having the logs removed at once; that it had endeavored to secure the services of at least one other person to do-the work, but, the price not being satisfactory, it finally contracted with Gibson. Since it was necessary for Gibson to obtain the goods in order to carry out his contract at all, and his. .failure might result in financial loss to the defendant company, it might be a reasonable inference from these facts that the Heading object which defendant had in view in giving its assurance to plaintiff under the circumstances was to subserve or promote its own interest, even though such assurance had the ■effect of paying what would otherwise have been the debt of ‘Gibson and particularly is this so in view of the further fact that Gibson’s performance of the contract would render defendant his debtor, and it could protect itself in its settlement with .him if the proceeds of the contract would defray the expense.

Counsel for appellant further contends in his brief that: “‘The evidence must show that the credit was extended exclu■sively to the promisor, and that the third party was absolutely •discharged from liability, in order to take the promise out of 'the statute of frauds.” "With the first part of this statement we fully agree. The rule is stated as follows: “But in all such ■cases it is requisite that credit should be given exclusively to the promisor; if any credit be given to him for whose benefit the promise is made, the promisor is not liable unless his promise ‘is in writing; and this is so although the collateral undertaking may have been the principal inducement to the delivery of the .goods or the performance of the services.” (20 Cyc. 181.) But the authorities cited by counsel do not sustain the proposition that, in addition to showing that credit was extended to the promisor exclusively, it must also appear that the third ■party was released from liability. At first blush some of the •eases would seem to support that contention, but a careful analysis will disclose that they do not go further than to hold to the .general rule just quoted above. The effect of an original promise is to make the promisor the debtor in the first instance, •even though the goods sold be for the benefit of another. It would be absurd to say in this case that credit was extended •solely to the defendant company, and Gibson was released from liability; for if the defendant company was an original promisor—that is, if it was the only debtor in the first instance— then there never was any liability to be released. (Browne on the Statute of Frauds, sec. 162.) It is only when one agrees to pay the pre-existing debt of another that the principle of law invoked by appellant is applicable (20 Cyc. 186); and that principle has no application to the facts of this case, because defendant’s promise, if made at all, was to pay for goods thereafter to be delivered to Gibson, and not to pay a pre-existing debt of Gibson’s.

The language employed by plaintiff in its letter to the defendant, in August, 1908, would seem to indicate that plaintiff then considered the defendant a guarantor of Gibson’s debt; but the courts are not inclined to decide these cases upon the mere form of expression employed by either the promisor or promisee, unless the words stand alone, unaided by any facts or circumstances, and the reason for this is obvious. The average layman does not weigh his words in the light of technical legal definitions, and could hardly be expected to distinguish between an original and a collateral promise.

Whatever construction may be put upon subdivision 2 of section 5660, Revised Codes, we think the provision is not applicable to the facts' so far as disclosed in this case. The case of Meldrum v. Kenefick, 15 S. D. 370, 89 N. W. 863, presents facts to which this subdivision is clearly" applicable.

Upon the several propositions which we have discussed under this assignment, the authorities are not altogether harmonious. But we think our views have the support of the decided weight of authority, and appear to us most consonant with reason. In view of these rules the trial court should have denied the motion for a nonsuit; but, not having done so, on consideration of the motion for a new trial it very properly reached the conclusion that the cause should have been submitted to the jury. What we have said under this assignment disposes of the third one also.

In our consideration of this appeal we have treated the evidence from the standpoint of the trial court at the time the motion for nonsuit was interposed; that is to say, we accept the evidence as true for the purpose of this appeal, and view it in the light most favorable to plaintiff. This is the rule in this state.

We do not find any error in the trial court’s ruling. The order granting a new trial is affirmed.

Affirmed.

Mr. Chief Justice Brantly and Mr. Justice Smith concur.