O'Brien v. Donnelly — 169 A.D. 709

Majority

p. 709

Dennis O’Brien, Respondent, v. Peter J. Donnelly, Appellant.

Third Department,

November 10, 1915.

Headnote

Guaranty — promise to answer for default of another — Statute of Frauds — when promissory note sufficient memorandum — when promise to indemnify not within the statute — limitation of action— indemnity — part payment — principal and surety — extension of time to pay note — consent to extension by guarantor.

It seems, that a writing in the ordinary form of a non-negotiable promissory note satisfies the requirements of the Statute of Frauds relating to a promise to indemnify one for the default of a third person.

Moreover, a promise by one person to indemnify another for becoming a guarantor for a third is not within the Statute of Frauds and need not be in writing.

Where the defendant agreed to indemnify the plaintiff if he would indorse the' promissory note of a third person and should be forced to pay the same, and to fulfill his promise gave to the plaintiff his own nonnegotiable promissory note, the Statute of Limitations on the latter note did not begin to run until the plaintiff had in fact paid the note upon which he was indorser.

Moreover, the defendant, by making part payment on his obligation to the plaintiff after the latter had paid the note, took the case out of the Statute of Limitations.

Where the notes which the plaintiff indorsed were four months'1 notes, and the note given by the defendant on his promise of indemnity was for one year, the plaintiff, by extending the time of payment of the notes he had indorsed, did not release the defendant from liability as surety.

Moreover, where such extension of time was given at the express request of the defendant, it was not made without his knowledge and consent so as to release him.

Appeal by the defendant, Peter J. Donnelly, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Saratoga on the 16th day of April, 1915, upon the report of a referee appointed to hear and determine the issues.

Thomas G. Barry [George B. Salisbury of counsel], for the appellant.

Harold H. Corbin, for the respondent.

The defendant is a Catholic priest. He was interested in one Edward Argy. He desired Argy to open up a business of gentlemen’s furnishings. Not having the credit himself, he came to the plaintiff and asked the plaintiff to indorse Argy’s note in order to aid him to raise $1,500 to set him up in business. He promised to indemnify plaintiff if he would do so. In pursuance of that promise he executed a paper, of which the following isa copy:

“Palmer Falls, Apr. 1th, 1905.

“The undersigned, Rev. P. J. Donnelly,' promises to pay Dennis O’Brien, one year from above date the sum of Fifteen hundred dollars ($1,500.00) value received.

“P. J. DONNELLY.”

O’Brien thereupon indorsed Argy’s note at the Corinth Bank for $1,500 for four months. That note was renewed from time to time, until 1908, at which time Argy died and O’Brien was called upon to pay the balance due, which he paid. After payment of this balance due he made a claim upon the estate of Argy and received a small amount upon his indebtedness. Thereafter the defendant himself sold some life insurance and paid the plaintiff several hundred dollars. There remained something due upon the amount paid by Dennis O’Brien for Argy, and he has recovered a judgment against the defendant in this action for the sum of $590.20 damages and costs. It is from this judgment that the appeal is taken.

The defendant urges three defenses to this action.

First, it is claimed that this promise was within the Statute of Frauds, and that the memorandum is not sufficient to satisfy the statute. It is difficult to see why the paper given by Donnelly to plaintiff would not satisfy the requirement of that statute, even though the contract be within the Statute of Frauds. It is held, however, in Jones v. Bacon ( 145 N. Y. 446 ) as follows: “ An oral promise by one person to indemnify another for becoming a guarantor for a third is not within the Statute of Frauds, and need not be in writing, and the assumption of the responsibility is a sufficient consideration for the promise.”’

This authority would seem to answer the claim of the appellant upon this branch of the case.

p. 711

It is further claimed that the action is barred by the six-year Statute of Limitations. The note was made in 1905, for payment one year from date. It was made, however, in fact to indemnify the plaintiff. The plaintiff could not bring his action against the defendant until he had in fact paid the liability upon the note, which was not paid until within six years beforé the commencement of this action. Furthermore, in 1909, the defendant paid to the plaintiff upon this liability several hundred dollars which he had received from life insurance, and this payment would itself take the case out of the statute.

The third defense insisted upon by the defendant is that the defendant has been discharged by the extension of time to Argy. Argy’s notes were for four months each, as is allowed in banking. The note of Donnelly was for one year. It is claimed that the provision was that Donnelly should be guarantor for only one year, and, therefore, for two renewals, and inasmuch as O’Brien signed renewal notes for two years thereafter, that he extended the time of payment, and, therefore, released Donnelly. It is not necessary to decide here how far this principle of law is applicable to "the facts in the case at bar. The finding of the court is that at the time the note was delivered by the defendant to plaintiff it was agreed between the parties that it was to be good for any amount that the plaintiff might ever lose or pay by reason of the extension to Argy, and there was no time fixed during which such extension of credit by indorsing said Argy’s note or otherwise should continue. It appears from the conversations between plaintiff and defendant that there was no limit in any way of one year, and the only inference is based upon the fact that the defendant’s note was for one year. This clearly can be explained by oral evidence, and the finding of the court would seem to be conclusive that O’Brien was to indorse for Argy as long as might be necessary. Whatever may have been the original agreement, however, it is evident that Donnelly knew of- these extensions from time to time, that he asked for them and advised them, and, therefore, the extension of time was not without the knowledge and consent of Donnelly, but expressly with his knowledge and consent. Furthermore,

p. 712

knowing all the facts he paid in 1909 to • the plaintiff several hundred dollars upon this indebtedness, thereby recognizing its validity. It follows from these considerations that the judgment should be affirmed, with costs.

Judgment unanimously affirmed, with costs.

Cases cited

Jones v. Bacon 145 N. Y. 446 N.Y. 1895-04-09 p. 709