Paul Reiss, et al.

vs
Jose M. Memije
Topic: Nature of Suretyship
FACTS
Defendant Memije entered into a contract with one Buenaventura Kabalsa for
the repair of his house. The contractor undertook to furnish the necessary materials,
including a considerable amount of lumber, to be used in the repairs. The contractor
being a man of no commercial standing in the community was unable to secure credit
therefor, and was compelled to pay cash for all purchases.
The work on the house being delayed for the lack of the necessary materials, defendant
accompanied the contractor to plaintiffs' lumber yard, and after satisfying plaintiffs as to
his own financial responsibility, and that as a property owner and an attorney in active
practice in the city of Manila, he was good for the amount of lumber needed in the repair
of his house, he entered into a verbal agreement with them whereby they were to
deliver the necessary lumber to the contractor for use in the repair of his house.
In pursuance of and in accordance with the directions of the defendant, plaintiffs
delivered to Kabalsa a considerable amount of lumber which was used in the repairs
upon defendant's house, and judgment in this action was rendered in favor of the
plaintiffs for the proven amount of the unpaid balance of the purchase price of this
lumber.
However, Memije contends that the evidence of record does not sustain a finding that
the defendant did in fact assume responsibility for the payment of the purchase price of
the lumber delivered to his contractor, and that even if he did so, the promise only
constituted a guaranty that the lumber will be paid, and since it was not in writing, proof
thereof was inadmissible under section 335 of the Code of Civil Procedure (Statute of
Frauds).
ISSUE
Whether or not the verbal promise made by Memije to the plaintiffs falls is a collateral
guaranty (and thus falling within the Statute of Frauds)
HELD
No. The importance of determining whether the promise made is of original or collateral
character lies in the principle that if the promise is an original or an independent one;
that is, if the promisor becomes thereby primarily liable for the payment of the debt, the
promise is not within the statute. But, on the other hand, if the promise is collateral to
the agreement of another and the promisor becomes thereby merely a surety, the
promise must be in writing.

Just what is the character of a promise as original or collateral is a question of law and
fact which must in each case be determined from the evidence as to the language used
in making the promise, and the circumstances under which the promise was made. So
that it is said that "While, as a matter of law, a promise, absolute in form, to pay or to be
'responsible' or to be the 'paymaster,' is an original promise, and while, on the other
hand, if the promisor says, 'I will see you paid,' or 'I will pay if he does not,' or uses
equivalent words, the promise standing alone is collateral, yet under all the
circumstances of the case, an absolute promise to pay, or a promise to be 'responsible,'
may be found to be collateral, or promises deemed prima facie collateral may be
adjudged original."
It is frequently a matter of difficulty to determine to whom the credit has actually been
given, whether to the defendant alone, in which case the debt is his own and his
promise is good without writing; or in part to the third party, in which case the
defendant's promise being collateral to and in aid of the third party's liability, requires a
writing to support it, or to both jointly, in which case as has been said their engagement
need not be in writing. This must be determined from the language and expressions
used by the parties promising, and from an examination of the circumstance showing
the understanding of the parties.
The Supreme Court decided that the credit for the lumber delivered by the plaintiffs to
defendant's contractor was extended solely and exclusively to the defendant under the
verbal agreement had with him, and therefore, that the provisions of the statue did not
require that it should be made in writing, based on the following findings:
Defendant admitted on the stand that his contractor had no commercial credit or
standing in the community, and it appears that plaintiffs, after investigation,
absolutely refused to extent him any credit whatever upon any conditions and
that the defendant was well aware of that fact.
From the testimony of the contractor himself, it seems clear that when the
agreement for the delivery of lumber was made, the credit was extended not to
the contractor but to the defendant.
It appears that both plaintiffs and defendant exercised especial precautions to
see that all the lumber was delivered on defendant's lot, and that before each bill
of lumber was delivered, defendant carefully examined the invoice, which the
agreement was submitted to him, and that no lumber was delivered without his
approval.
Not being apprised of the true nature of the agreement, the acting manager of
the plaintiffs, when the latter left for the United States, sent a statement of
account and a bill for the lumber to the contractor, supposing that the lumber had
been sold to him, and only discovered his mistake on later investigation and
correspondence with his principals, after the contractor had notified him as to the
true nature of the transaction.