GR L 13510; (October, 1918) (Digest)
G.R. No. L-13510; October 23, 1918
HENRY W. PEABODY & COMPANY, plaintiff-appellant, vs. J. F. BROMFIELD and JAMES ROSS, defendants-appellees.
FACTS:
Henry W. Peabody & Company (plaintiff) financed the Commercial Vehicle Company, requiring it to increase its capital to ₱50,000 or face credit curtailment. To avoid liquidation, it was agreed that four individualsEdward B. Bruce, J. F. Bromfield, James Ross, and P. M. Scott (the plaintiff’s local manager and de facto representative)would sign a joint and several guaranty to secure the plaintiff against losses from financing the Vehicle Company. Scott agreed to sign as part of this group. Bruce drafted the guaranty contract, and Bromfield, Ross, and Bruce signed it. Bruce then sent the signed document to Scott, expecting him to sign as well. However, Scott never signed it, though he retained the document. The plaintiff later sought to enforce the guaranty against Bromfield and Ross after the Commercial Vehicle Company incurred debts. The defendants contended that the guaranty was not binding because Scott, a co-guarantor, failed to sign as agreed.
ISSUE:
Whether the contract of guaranty is binding and enforceable against the defendants despite the failure of P. M. Scott, the plaintiff’s agent and an intended co-guarantor, to sign it as originally agreed among the parties.
RULING:
No. The Supreme Court affirmed the dismissal of the complaint. The guaranty contract was not perfected and thus unenforceable. The agreement among the four intended guarantors was that all must sign the contract for it to be effective. Scott’s signature was a condition precedent to the existence of a binding contract. Since Scott, acting for the plaintiff, did not sign, the contract remained incomplete. The parol evidence rule does not bar proof of this antecedent condition, as it does not contradict the written instrument but relates to its very formation. Moreover, the Statute of Frauds requires such a promise to answer for the debt of another to be in writing and subscribed by the party charged; here, the intended contract was never fully executed. The plaintiff could not enforce an incomplete written contract or the prior oral agreement. The defendants’ liability never attached.