Summary
In Jones v. Bacon, 145 N.Y. 446, 449, 40 N.E. 216 (1895), the Court of Appeals held that the "promise by one person to indemnify another for becoming a guaranty for a third is not within the statute [of frauds] and need not be in writing."
Summary of this case from Barclays Bank of New York v. GoldmanOpinion
Argued March 14, 1895
Decided April 9, 1895
William H. Smith for appellant.
Henry M. Field for respondent. Frank Rice for respondent.
The oral promise of the defendant's testator to the plaintiff was, in substance, a promise of indemnity in case the plaintiff would become indorser on the note of Kingsbury to the banking firm of McKechnie Co. for a debt of Kingsbury to the bank. The plaintiff thereupon indorsed the note of Kingsbury to the bank, and has been compelled to pay thereon the sum of about $16,000, Kingsbury having made default and being insolvent. This is a statement of the facts in the simplest form, and the question arises whether the oral promise by the defendant's testator to indemnify the plaintiff was void under the Statute of Frauds, as being a promise to "answer for the debt, default or miscarriage of another person." (2 Rev. St. 135, sec. 2, sub. 2.) This is no longer an open question in this state. It was decided in Chapin v. Merrill (4 Wend. 657) that a promise by one person to indemnify another for becoming a guaranty for a third is not within the statute and need not be in writing, and that the assumption of the responsibility was a sufficient consideration for the promise. The doctrine of Chapin v. Merrill was approved in Mallory v. Gillett ( 21 N.Y. 412), in Sanders v. Gillespie (59 id. 250), and Tighe v. Morrison (116 id. 263), and in other cases in this court. The same doctrine now prevails in the English courts. ( Thomas v. Cook, 8 Barn. C. 728; Reader v. Kingham, 13 Com. Bench, N.S. 344; Wildes v. Dudlow, L.R., 19 Eq. Cas. 198.) We do not deem it proper to re-open the discussion or to refer to cases where a different view has prevailed. The court below considered the subject at large, and the able opinion of BRADLEY, J., refers to many of the cases on the subject.
The plaintiff was, therefore, entitled to maintain an action except for his act in releasing Kingsbury from his liability for the money he was compelled to pay on account of the indorsement. The release was probably essential in order to enable the plaintiff to make any proof of the agreement for indemnity, since he could establish the promise only by Kingsbury, the plaintiff himself not being a competent witness by reason of the death of the promisor McKechnie, and there being no other person cognizant of the transaction. By the release Kingsbury was discharged from all responsibility to the plaintiff. The plaintiff having paid the debt in part out of his property, could, prior to the release, have maintained an action against Kingsbury to recover the sum so paid. ( Butler v. Wright, 20 Jo. 367; Hunt v. Amidon, 4 Hill. 345.) The indemnitor of the plaintiff, on restoring to him this sum in performance of the contract of indemnity, would be entitled to be substituted to the claim of the plaintiff against Kingsbury. This stands upon the most obvious principles of natural justice. The money paid by the plaintiff was at the request of Kingsbury, implied from the legal liability as indorser assumed by him, and Kingsbury was bound to reimburse the plaintiff. But, by an independent contract between the plaintiff and his indemnitor, McKechnie, the latter was also bound to save the plaintiff harmless. On performance of this obligation by the indemnitor, he would be entitled to stand in the shoes of the plaintiff as to his right to call upon Kingsbury. By equitable substitution the indemnitor would take the right which the plaintiff had against Kingsbury. There was no privity of contract between the indemnitor and Kingsbury, but there was between the plaintiff and Kingsbury. On paying the plaintiff what he had been compelled to pay for Kingsbury, pursuant to the contract of indemnity, the indemnitor would stand as the equitable assignee of the plaintiff of the obligation of Kingsbury to him. Kingsbury had no equity to be relieved from his obligation, because the plaintiff had recourse against McKechnie. The plaintiff, though not strictly such, had the equities of a surety against Kingsbury, and the equities by operation of law would pass to McKechnie on his performing his contract of indemnity, except for the release. The release of Kingsbury by the plaintiff materially changed the rights and remedies of the defendant against Kingsbury. It barred any claim against Kingsbury in behalf of the estate of the indemnitor, to recover as the representative of the rights of the plaintiff against him, in case the plaintiff should prevail in the action. Such an interference plainly operates to discharge the estate of the indemnitor.
Upon the ground that the release defeated the right of action, the judgment should be affirmed.
All concur, except HAIGHT, J., not sitting.
Judgment affirmed.