§ 1758. Right of guarantor who pays note. The guarantor of a note, who pays it upon his guaranty of payment by the payee, who is also indorser, is entitled to it for his own use when he pays it to the holder; and in so doing he becomes vested with the same rights which the payee had against the maker, and no more. If the consideration as between the maker and payee has failed, he cannot recover of the maker, as he does not step in the shoes of the bona fide holder, to whom he paid it.24

A guaranty of a note made after its execution upon a new and sufficient consideration is valid, although the note is payable to the maker's order and not indorsed by him, it having been in that condition at the time the guaranty was made.2

SECTION II.

25

THE CONSIDERATION OF GUARANTIES AND THE OPERATION OF THE

STATUTE OF FRAUDS.

1759. (I) As to the consideration of guaranties.

It is necessary to the validity of a guaranty that it should be upon a valuable consideration. There are three classes of cases which should be discriminated: (1) When the guaranty is contemporaneous with the principal contract. In such a case it is not necessary that it should be a separate and distinct consideration from that upon which the bill or note was executed. It may be for the accommodation of the drawer, maker, or other party to add strength to the paper and induce the guarantee to take it, and then the value received from him embraces the guarantor as well as the principal. The credit is not given solely to either, but to both; and when the guaranty is made prior to delivery, it will be presumed to be upon consideration of the credit, and will be valid.26

24. Putnam v. Tash, 12 Gray, 121; post, § 1789.

25. Jones v. Thayer, 12 Gray, 443; Carpenter v. Thompson, 66 Conn. 457, 34 Atl. 105.

26. Parkhurst v. Vail, 73 Ill. 323; Draper v. Snow, 20 N. Y. 331; Manrow v. Durham, 3 Hill, 584; Leggett v. Raymond, 6 Hill, 639; Bickford v. Gibbs, 8 Cush. 184; Hopkins v. Richardson, 9 Gratt. 494; Snively v. Johnson, 1 Watts & S. 309; Colburn v. Averill, 30 Me. 310; Gillighan v. Boardman, 29 Me. 79; Campbell v. Knapp, 15 Pa. St. 27; Cahill Iron Works v. Pemberton, 48 App. Div. 468, 62 N. Y. Supp. 944. But somewhat in conflict with the principle announced in the text, it has been held in Kentucky that the guarantor of a note, even where the guarantee was contemporaneous with the execution of the principal contract, may rely for defense upon want of consideration

27

§ 1760. (2) When the guaranty is made after the contract is completed, and is not for the benefit of the guarantor.-In such case, the original consideration being exhausted, there must be some new and sufficient consideration to support it, otherwise it will be void. And when it is shown that the guaranty was made after the completion of the note or other contract, there is no presumption of consideration, but the contrary; and the plaintiff must prove a new and express consideration in order to enforce it.28 There may, however, be circumstances which show that, although the guaranty was not made until after delivery of the instrument, it was designed and understood originally that it should be made, or have the effect as if made beforehand, and that it entered into the inducement to the promisee to take it; and under such circumstances it will relate back to the time when it was intended to operate, and be valid accordingly.29 But unless this be the case, the consideration must appear, where it is necessary that it be set forth, in order to satisfy the Statute of Frauds.30

1761. (3) When the guaranty is made after the contract is completed, and is for the benefit of the guarantor. Thus, where a party holds a bill or note, and upon a transfer in some transaction of his own guarantees it to his transferee in such case, the consideration moves directly to him for his own benefit; it is really his own debt that he promises to pay in a particular way, and not the debt of another.31 And the clause of the statute respecting

for the note unless he has received consideration therefor from the creditor. See Wood Mowing & Reaping Machine Co. v. Land, 98 Ky. 516, 32 S. W. 607; Winans v. Gibbs & Starrett Mfg. Co., 48 Kan. 777, 30 Pac. 163, citing text. See Bageley v. Cohen, 121 Cal. 604, 53 Pac. 1117; Dillman v. Nadelhoffer, 160 Ill. 121, 43 N. E. 378.

27. Howe v. Merrill, 5 Cush. 80; Tenney v. Prince, 4 Pick. 385. See also and compare Williams v. Williams, 67 Mo. 667; Green v. Shepherd, 5 Allen, 570. But as to innocent holder, see Ewing v. Clarke, 8 Mo. App. 570; Howard v. Jones, 13 Mo. App. 596; Baker v. Wahrmund, 5 Tex. Civ. App. 268, 23 S. W. 1023; Messenger v. Vaughan, 45 Mo. App. 15; Lowenstein v. Sorge, 75 Mo. App. 281; Bank of Commerce of West Superior v. Ross, 91 Wis. 320, 64 N. W. 993.

28. Tenney v. Prince, 4 Pick. 385; Klein v. Currier, 14 Ill. 237; Parkhurst v. Vail, 73 Ill. 323; Johnston v. McDonald 41 S. C. 81, 19 S. E. 65. See Adams v. Huggins, 78 Mo. App. 219.

29. Hawkes v. Phillips, 7 Gray, 284; Moies v. Bird, 11 Mass. 436; Adams v. Huggins, 73 Mo. App. 140; Pauly v. Murray, 110 Cal. 13, 42 Pac. 313. 30. Edwards on Bills, 223.

31. Osborne v. Lawson, 26 Mo. App. 554. See Leonhardt v. Citizens' Bank, 56 Nebr. 38, 76 N. W. 452.

a promise or engagement to pay the debt of another has no application to it.32

§ 1762. (II) As to the operation of the Statute of Frauds.- In the 29th year of Charles II. (1667), there was enacted "The Statute of Frauds," as it is called, a provision of which was that "noe action shall be brought whereby to charge the defendant upon any speciall promise to answere for the debt, default, or miscarriages of another person, unlesse the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized."

Many questions have arisen upon the construction of this statute, both in England and in the United States, in every one of which it has been copied, either precisely or in a somewhat modified form, and some of them it is necessary to consider in connection with guaranties. (1) When is a guaranty such a promise to answer for the debt of another as to come within the meaning of the statute? (2) How must it be expressed, when it comes within the statute, in order to conform to it?

33

§ 1763. Firstly: When a guaranty is a promise to answer for the debt of another. When a third person gets credit or forbearance, upon the guaranty of another, even when it is contemporaneous, the latter's promise is clearly "a promise to answer for " his debt, and it must comply with the statute in order to be valid. But there are cases in which a guaranty is really to answer for one's own debt, though having the appearance of a promise to answer for another's, and in such cases it is not within the statute. Thus, where the defendant transferred the note of a third person, payable to him or bearer, to the plaintiff in exchange for his own note, which plaintiff held, and at the same time indorsed a guaranty on the back of it, without expressing a consideration, it was held that," although in form a promise to answer for the debt or default of another, in substance it was an engagement to pay the guarantor's own debt in a particular way," and that "it would be good without any writing." 34 So where a third person's note was transferred with mere verbal guaranty that it was good

32. See post, § 1763.

33. Throop on Verbal Agreements, 640, § 650; Jones v. Bacon, 72 Hun, 506, 25 N. Y. Supp. 212.

34. Brown v. Curtis, 2 N. Y. 225.

and collectible," in part payment of a horse, it was held valid, because in reality a promise to pay the amount, unless the third person paid it for him.35 This doctrine is uniformly adopted in the United States, where the guaranty is upon a pre-existing consideration, as well as where it is for a debt contracted, goods sold, or obligations exchanged, at the time the guaranty is made.36 Where one who sells a note guarantees its payment, the guaranty is an original undertaking, and need not be written.37

§ 1764. Secondly: As to the terms of the guaranty. It has been held uniformly in England, that when the guaranty is to answer the debt of another the consideration must be expressed, as well as the promise, to satisfy the word "agreement” in the statute, and that parol evidence is inadmissible to suppy it.38 This view rested upon the ground that the word "agreement was used in the sense of a mutual contract, and that it was necessary for the consideration, without which there is no contract, to appear upon the face of the writing, in order to the existence of a written agreement. In the United States a number of cases have adopted this reasoning;39 but the word "agreement" signifies, in its ordinary acceptation, the thing agreed upon, and it would seem that if the thing agreed upon was in writing the statute would be complied with. It is true that the formal compact is technically. an agreement; but the word would seem to have been used in its popular and ordinary sense, rather than as a technicality, being intended to apply to all manner of contracts among the people; and the

35. Cardell v. McNiel, 21 N. Y. 336 (1860). See also Fowler v. Clearwater, 35 Barb. 143 (1861); Dauber v. Blackney, 38 Barb. 432 (1862); Milks v. Rich, 80 N. Y. 269 (1880). See ante, § 739a.

36. Beaty v. Grim, 18 Ind. 131 (1862); Malone v. Keener, 44 Pa. St. 107 (1862); Dyer v. Gilson, 16 Wis. 557 (1863); Huntington v. Wellington, 12 Mich. 10 (1863); Thurston v. Island, 6 R. I. 103 (1859); Hopkins v. Richardson, 9 Gratt. 485 (1852); Hall v. Rodgers, 7 Humphr. 536 (1874); Rowland v. Rorke, 4 Jones (N. C.) 337 (1857); Johnson v. Gilbert, 4 Hill, 178; Meech v. Smith, 7 Wend. 315; Sheldon v. Butler, 24 Minn. 513.

37. Meech v. Smith, 7 Wend. 315; Hunt v. Adams, 5 Mass. 358.

38. Wain v. Walters, 5 East, 19; Saunders v. Wakefield, B. & Ald. 595; Jenkins v. Reynolds, 3 Brod. & B. 14; Morley v. Boothby, 3 Bing. 107; Newbury v. Armstrong, 6 Bing. 201; Alnutt v. Ashenden, 5 M. & G. 392.

39. Henderson v. Johnson, 6 Ga. 390; Elliott v. Giese, 7 Harr. & J. 457; Rigby v. Norwood, 34 Ala. 129; Simons v. Steele, 36 N. H. 73; Sears v. Brink, 3 Johns. 210; Leonard v. Vredenburgh, 8 Johns. 29; Nichols v. Allen, 23 Minn. 543; Ordeman v. Lawson, 49 Md. 135; Parry v. Spikes, 49 Wis. 385; Cahill Iron Works v. Pemberton, 48 App. Div. 468, 62 N. Y. Supp. 944.

opinion predominates in this country that if the promise is written it is sufficient.40

§ 1765. When name in blank is sufficient writing to satisfy Statute of Frauds.- In those States where the consideration is not required to be expressed, the name of the party in blank is often regarded as a sufficient writing to satisfy the statute, the signature applying to the contract already written, or to the words above the signature, which are afterward written by implied authority, as, for instance, where one not the payee of a note indorses it when it is made. This is, we think, the correct view; but there is also another ground on which such party may be held, that is, that such party is an indorser, and that the statute has no application to those cases which come peculiarly within the rules of the law merchant.42

41

Where the statute only requires the "promise" to be in writing, it is not necessary for the consideration to appear."

43

§ 1766. When consideration must appear it need not be set out at length. Where it is held that the consideration must appear in the guaranty of another's debt, it is nevertheless not necessary that it be set out at length; but sufficient, if it appear by reasonable intendment. Thus, "I hereby guarantee the present account of Miss H. M., due to B. & Co., of £112 4 4, and what she may contract from this date to 30th of September next," was held sufficient indication of the consideration; which was for a future. as well as past credit, and it was not necessary that the consideration and promise should be coextensive. So, "in consideration of your being in advance to Messrs. Lees & Sons, in the sum of £10,000, for the purchase of cotton, I do hereby give you my guaranty for that amount in their behalf.” 45 So, "You will

40. Packard v. Richardson, 17 Mass. 122, Parker, C. J.; Smith v. Ide, 3 Vt. 390; Gillighan v. Boardman, 29 Me. 79; Sage v. Wilcox, 6 Conn. 81; Reed v. Evans, 17 Ohio, 128; Buckley v. Beardslee, 2 South. 570; Ashford v. Robinson, 8 Ired. 114; Wren v. Pearce, 4 Smedes & M. 91; Little v. Nabb, 10 Mo. 3. 41. Perkins v. Catlin, 11 Conn. 213; Nelson v. Dubois, 13 Johns. 175; Moies v. Bird, 11 Mass. 436; Sloan v. Gibbes, 56 S. C. 480, 35 S. E. 408, 76 Am. St. Rep. 559, citing text; Pauly v. Murray, 110 Cal. 13, 42 Pac. 313.

42. See chapter XIX, § 567, and notes, vol. I; Throop on Verbal Agreements, 159, §§ 85, 86; text approved in Taylor v. French, 2 Lea, 260.

43. Colgin v. Henley 6 Leigh, 85; Taylor v. Ross, 3 Yerg. 330; Pearce v. Wren, 4 Smedes & M. 91; Violett v. Patten, 5 Cranch, 142; Edwards on Bills, 240, 241.

44. Russell v. Moseley, 3 Brod. & B. 211. 45. Haigh v. Brooks, 10 Ad. & El. 309.