State Bank at New Brunswick v. Mettler — 15 N.Y. Super. Ct. 392

Majority

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The State Bank at New Brunswick, Appellants, v. Mettler, et. al., Respondents.

Headnote

1. To render a verbal promise valid, when made by the defendants, to a third person, to pay to the plaintiffs, creditors of the promisee, a debt which he owes to them, it must be founded upon a consideration, and arise out of a transaction, by force of which, the promisors become substantially the debtors of the promisee, in respect of the sum, and to the amount which they thus agree to pay, so that making payment, according to the terms of the promise, will be a satisfaction of their own debt, or the discharge of an obligation, resting upon them, as principals.

2. When the promise places the promisors in the position of sureties for the debt of their promisee, so that making the promised payment, will convert the promisors into creditors of the promisee, for the amount so paid, the case falls within the statute, and the agreement is void, if not in writing, though based upon a consideration sufficient to uphold it.

(Before Bosworth and Hoffman, J. J.)

Heard, November 9th, 1857 ;

decided, February 6th, 1858.

The President, Directors and Company of the State Bank at New Brunswick, in the State of New Jersey, are the plaintiffs in this action, and Samuel Mettler, J. Spaulding Reynolds and William F. Mettler are the defendants. It now comes before the Court, at General Term, on an appeal by the plaintiffs, from a judgment, in favor of the defendants, entered on the report of a referee, to whom it had been referred to hear and decide it.

It is brought to recover the amount of an unaccepted draft, or bill of exchange, drawn by John Mettler, on Mettler, Reynolds & Co., the defendants, upon an alleged promise to pay the same.

The complaint, in substance, alleges:—

I. That John Mettler, of New Brunswick, N. J., prior to the 12th of April, 1852, was engaged in business there, as a grain-merchant ; that Samuel Mettler, of New York City, before and at that date, was a grain and flour commission merchant, and in business as such in the City of New York, as one of the defendants’ firm.

II. Before that date, he, (Samuel,) had been a member of the firms of “ Lane & Mettler ” and “ Stewart & Mettler,” after which the firm

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of “ Mettler, Reynolds & Co.” was formed, all of them, in turn, prosecuting the same business.

TIT. For about eleven years prior to the 12th of April, 1852, either the said Samuel alone, or his said firms, received, from time to time, consignments of produce from said John, to be sold on commission, “ with the understanding and agreement,” between said John and Samuel, or the said John and the various firms aforesaid, that John “ might draw for moneys” on Samuel, or said firms respectively, against such consignments, and that such drawee, or drawees “ should accept and advance moneys on said drafts, and reimburse himself or themselves out of the proceeds of such consigned property,” “being allowed the customary charges and commissions on such advances, and making such sales.” Such was the “ nature of the understanding and agreement existing between the said” John and the defendants, on the 12th of April, 1852.

IY. On the 12th of April, 1852, in pursuance of such understanding, John Mettler made his draft as follows:—

“ New Brunswick, April 12th, 1852.

“ $4000.

“ Thirty days after date, for value received, pay to John B. Hill, Cashier, or order, four thousand dollars, and charge the same to my account. “John Mettler.

“ Mettler, Reynolds, & Co.

“ 64 Dey street, N. Y.”

The plaintiffs received it from John Mettler, on the day' of its date, and advanced to him its full amount, less the legal discount, “ under the full faith and confidence, that the same would be duly accepted and paid.”

Y. On the 15th of May, 1852, it was presented for payment, which was refused. The defendants had, previously, refused to accept it, on the alleged grounds, that they had no property of the drawer in their hands, and he was then indebted to them, the truth of which, the complaint denies, on information and belief.

YI. The money, so advanced on the drafts, was applied, by John, to pay for grain he had on hand, of the value of about

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$12,000, which. John was to consign to the defendants, “ under the understanding, and in the course of business aforesaid, and part of, which was on the way to be delivered to said defendants, under said arrangement.” All the grain mentioned in this paragraph came to the hands of the defendants, and was converted to • their own use.

VII. “ And the said plaintiffs say, that between the said twelfth day of April, A. D., 1852, and the fifteenth day of May, A. D., 1852, the said defendant, in consideration that the said John Mettler would permit the property he had consigned to said defendants to come to their hands, and would turn over or transfer to them, or to said Samuel Mettler, all the produce the said John Mettler then had on hand, and confess a judgment to the said Samuel Mettler or the said defendants, under which said Samuel or the said defendants might sell the real and personal estate of said John Mettler, and receive the avails thereof, they, the said defendants, would accept and -pay such drafts as were held by any banks at the date of such promise; and confiding in such promise, the said John Mettler permitted the consigned property to come to the hands of said defendants, as proposed, and turned over and transferred to them all the produce of the said John Mettler, and confessed to them a judgment according to the terms so proposed to him. And in pursuance of such permission, transfer and judgment, the said defendants received a large amount of property of the said John Mettler.”

VIII. At the date of such transfer and agreement, the plaintiffs held and owned the draft, and the whole amount of it was due to them, as the defendants then knew. But though requested to do so, the defendants have not, and would not pay, to the plaintiffs, any part of the draft, and the whole amount of it is due to the plaintiffs.

IX. The plaintiffs, when they received the draft, were, and since have been, a banking corporation, duly created by the laws of New Jersey. Judgment was demanded for $4000, with interest from the 15th of May, 1852, and the costs of the action.

The answer was in these words, viz.:—

“ The defendants, for answer to the plaintiffs’ complaint, admit, that before the 12th day of April, 1852, John Mettler was engaged in business in New Brunswick, State of New Jersey; that Samuel

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Mettler wag, on the 12th day of April, 1852, engaged in business with J. Spaulding Reynolds and William F. Mettler, under the firm of Mettler, Reynolds & Co., the defendants in this action; and that before the 12th day of April, 1852, said Samuel Mettler had been engaged in business under the firm of Lane & Mettler, and under the firm of Stewart & Mettler, in the City of New York.

“Defendants, further answering, deny each and every other allegation in said complaint, except those hereinbefore admitted.”

The referee made a report of the facts found by him, and of his conclusions of law, as follows:—

“ I do report, that the plaintiffs, at the time of commencing this action, and for several years prior thereto, were a banking corporation duly authorized, by the laws of the State of New Jersey, to do business as such, under the above-named title, and are the lawful owners of the draft, a copy of which is set forth in the complaint.

“That the defendants were on the 12th day-of April, 1852, and had been, from February previous thereto, flour and commission merchants, doing business in the City of New York, and succeeded the different firms and persons in the same business as set forth in the complaint.

“That John Mettler, a brother of the defendant, Samuel Mettler, had been living in New Brunswick, engaged in the produce business for about twelve years, prior and up to May, 1852; that during this period, the course of business existed between John Mettler and the plaintiff, and the defendants and the several firms to which the defendants succeeded during the several periods in which they were respectively engaged, substantially as set forth in the complaint. That on this 12th day of April, 1852, John Mettler drew the draft, set forth in the complaint, for $4000 at thirty days on the defendants; that the plaintiffs discounted it, and sent it to the defendants for acceptance, which was refused; that the proceeds of this draft were chiefly used to pay on the account of grain which John Mettler had bought, and which finally came to the hands of the defendants, under the agreement with John Mettler to pay the plaintiffs hereinafter mentioned; that after the draft had been presented for acceptance, and before the same became payable, John Mettler, having a large amount

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of grain at different places in the country, and on the way to Hew York, refused to allow the grain to go forward to the defendants, and told them he would turn it over to the plaintiffs unless defendants would accept and pay this draft and others coming due at the banks; that the defendants refused to accept this and other drafts, but agreed with John Mettler that John should ajlow all the grain to go into their hands, and should assign to them certain canal barges and his other personal property, and confess a judgment to them to bind his real estate, in consideration of which the defendants agreed to settle and pay this draft to the plaintiff; that John Mettler did turn the grain over and assign all his personal property, and did confess a judgment to the defendants as was agreed between them, but the defendants have, not settled and paid this draft to the plaintiffs as they agreed with John Mettler to do, and the whole amount of the same remains due and unpaid. And upon the foregoing facts, I find and decide, as matter of law, that the plaintiffs are not entitled to recover in this action, and that the complaint should be dismissed, and I give judgment for the defendants, dismissing the same with costs.

“ Datgd, Hew York, February 28th, 1857.”

The plaintiffs, in due time, filed various exceptions to the decision of the referee. A judgment having been entered on the report of the referee, the present appeal from it was taken by the plaintiffs. It is unnecessary to give any further statement of the evidence than is contained in the opinion of the Court.

Wm. Curtis Noyes, for appellants.

E. S. Van Winkle, for respondents.

The complaint states, and the referee finds, that for about eleven years prior to the transaction in question, either S. Mettler alone, or the firms of which, during that period, he was a member, received, from time to time, produce from John Mettler, upon an agreement between him and S. Mettler, or the firms of which the latter was a member, that John Mettler might draw against such consignments, and that S. Mettler, or his firms, should accept and pay, and reimburse themselves out of the proceeds of the property so consigned.

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That was the relation existing, between the defendants and John Mettler, when the latter drew and the plaintiffs discounted the bill in question, and when the special promise, found by the referee, was made.

The produce which John Mettler threatened to stop, and withhold from the defendants, was allowed, in consequence of the special promise, found by the referee to have been made, to go' into the defendants’ hands under that previous and subsisting arrangement, and on the terms of that arrangement only, except in so far as that arrangement was modified by the special promise itself.

The referee does not find, that the produce and other property was bought, by the defendants, of John Mettler, or that they agreed upon its value, or upon any price at which it was to be accounted for. The fact that John Mettler was, as a part of the transaction, to confess a judgment to the defendants, so as to bind his real estate, imports, that such judgment was to be confessed as a security for such sum as he might then owe them, or for such liabilities as they had incurred, or might incur, for him, or both.

It is, therefore, quite clear, as, we think, that the facts found establish, that the defendants did not purchase, of John Mettler, the grain which was sent forward, or the canal barges, or the other personal property which he trnsferred to them. Their promise to him to settle, and pay to the plaintiffs, the bill in question, was not a promise to pay the whole or a part of the price of property which they had bought.

Was it a promise to apply the proceeds of the property transferred, in consideration of such transfer, by paying such proceeds to the plaintiffs in satisfaction of such bill ? The referee’s finding does not state the promise in this form. If such,could be deemed to be its effect, or meaning, it is not found that the property transferred was, in value, equal to the amount of the bill in question, nor is it found that they had, or could have, realized enough from the property to pay it.

To take the case out of the statute of frauds, the verbal promise of a third person, made to a debtor of the plaintiffs, to pay to the latter a debt which the promisee owes them, must find its consideration in a purchase of property from the promisee, so that the amount which is promised to be paid, is to be paid in discharge of the proper debt of the promisor, or the transaction and

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promise must be such, that, making the promised payment to the plaintiffs, as creditors of the promisee, will operate, incidentally, as a satisfaction of the debt of the latter, and, primarily, as payment of the debt of the promisor. (Jackson v. Raynor, 12 J. R. 291; Farley v. Cleveland, 4 Cowen, 432; S. C. in error, 9 Id. 639; Ellwood v. Monk, 5 Wend. 235 ; Johnson v. Gilbert, 4 Hill, 178 ; Barker v. Bucklin, 2 Denio, 60 .)

When the promisor has received from the plaintiffs’ debtor property of the latter, upon an agreement to sell it, and pay the proceeds to the plaintiffs, in satisfaction of a debt which the promisee owes them,, the plaintiffs may sue on such promise, and recover the amount of the proceeds, if they shall have been informed of, and shall have assented to the arrangement prior to the receipt of the proceeds by the promisee. (Seaman v. Whitney, 24 Wend. 260 .)

But, as already remarked, no such fact is found to exist in this case.

This case, as the facts found present it, is one in which the defendants claimed, at the time of the promise, to be creditors of John Mettler. The referee has not found whether they were or not. The testimony is uncontradicted, that they were then under liabilities for John Mettler to the amount of at least $25,000. One of the instruments of transfer, purports to be made in consideration of the indebtedness of John Mettler, by reason of advances and acceptances made by the defendants for him, and authorizes the proceeds of the property, so transferred, to be applied to satisfy the advances thus made, and the liabilities incurred, by reason of such acceptances.

Hence, the defendants were anxious to obtain a judgment against John Mettler, by confession, as well as a transfer of the canal barges and of his other personal property, and to receive his produce to be sold and applied, under the arrangement then subsisting between them.

To obtain these securities they promise him, that they will settle and pay the debt in question to the plaintiffs. It is a promise to him to pay a debt he was owing to the plaintiffs. It was not a promise to satisfy a debt owing by themselves, by making payment of it to the plaintiffs, instead of John Mettler.

It was, therefore, strictly and literally a promise to pay the debt

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of another. Conceding the consideration to be sufficient, the agreement was not in writing.

To make a promise of one person to pay the debt of another valid, it must not only be in writing, but must also, in all cases, be founded upon a sufficient consideration.

It is not enough, to take such a verbal promise out of the statute, that it is founded upon some consideration of value recéived by the defendant: for, in all cases, in which the creditor is not a party to the contract, the consideration must consist of something beneficial to the promisor, or of damage, to which the promisee submits.

I do not think there is any such established distinction as that, if the consideration consists of harm to the promisee, (the one owing the debt to be paid,) the agreement, to be valid, must be in writing, but need not be, if it consists of something beneficial to, and received by the promisor, no matter what such consideration may be.

In the latter case, to render the promise valid when not in writing, it must be founded upon a consideration, and arise out of a transaction, by the terms, or by force of which, the promisor becomes substantially the debtor, of the promisee, in respect of the sum, and to the amount which he thus agrees to pay, so that making payment according to the terms of the promise will be a satisfaction of his own debt, or the discharge of an obligation resting upon him as a principal. When the promise places the promisor in the position of a surety for the debt of his promisee, the case falls clearly within the statute, and the agreement is void. (Barker v. Bucklin, supra; Brown v. Curtis, 2 Coms. 225 ; Brewster v. Silence, 4 Seld. 207.)

Payment by the defendants to the plaintiffs, of the bill in question, would make the former creditors of John Mettler for the amount paid. Hé would be obliged, (if able,) to refund it, if the property transferred should prove insufficient to pay any part of it, after satisfying their other liabilities for him.

In our opinion, on the facts as found, the promise which the referee holds to have been established, is a promise to pay the debt of John Mettler, and is void, because the promise and the consideration of it are not contained in a written agreement, signed by the defendants.

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• H we did not regard this view as free from reasonable doubt, we should consider it the duty of the Court to reverse the judgl ment, set aside the report, vacate the order of reference, and order a new trial, on the ground that the evidence does not warrant the finding that “ the defendants agreed to settle and pay this draft to the plaintiffs,” absolutely and unconditionally.

. John Mettler’s deposition is the only evidence which can be claimed to establish the fact as found. To the eighth direct interrogatory he says, “ I then turned over the grain to the defendants, in consideration of their promise to settle with said plaintiffs and my other creditors.” “ The defendants agreed to have the drafts settled, with other creditors, if,” etc.

To the ninth, he says, “ I turned over the grain on condition that the defendants would settle with the plaintiffs for the amount of said draft and my other creditors.”

The answer to the tenth adds nothing. These answers show as strongly, that the defendants assumed and agreed to pay all the debts of John Mettler, as that owing to the plaintiff.

The answers, to the" cross-interrogatories, recall every thing contained in the answers to the direct, tending to show an unconditional promise to pay; vide answers to the fifth and sixth cross interrogatories. “ It was the understanding that the defendants should pay themselves, first, out of the property, and then apply the balance in payment or compromise with my other creditors.” This transaction was on the 23d of April, 1852. The transfers were made on the 27th, 28th and 29th of April, 1852.

The only promise which this evidence authorized the referee to find, was a promise to convert the property, and, after applying the proceeds, to pay, first, the amount due to the defendants, and satisfy their liabilities for John Mettler; and next, apply the balance to pay, or in compromising with his other creditors.

If, therefore, the defendants would run any serious risk of being ultimately held liable, upon the facts as found, to pay the draft in question, the judgment should be reversed and a new trial granted, because the fact of the promise being made as stated, is wholly unwarranted by the evidence.

• But we cannot doubt that the promise is one to pay the debt of another, and, not being in writing, is void. The defendants have not appealed from the judgment, and are not strictly in a position

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to insist that the facts are erroneously found. They have not appealed, and therefore have not placed themselves in a position to have a review, upon the evidence, of the conclusions of fact.

We think the judgment should be affirmed, on the ground that the facts as found create no legal liability on the part of the defendants to pay to the plaintiffs the bill or draft in question.

Judgment affirmed.

Cases cited

Ellwood v. Monk 5 Wend. 235 N.Y. Sup. Ct. p. 398