Memorandum of Decision Re: Contract Dispute
1. The oral agreement between him and Lowers is unenforceable pursuant to the Statute of Frauds;
2. The obligations which resulted in the claims against Lowers were never formally assumed by the corporation, so that they were not covered by his promise to pay the corporation's debts; and
3. The Indemnity Agreement precludes Lowers from making a claim.
The court is unmoved by the Statute of Frauds argument. Section 1624(b) of the California Civil Code makes an unwritten agreement to pay another's debts unenforceable by the creditor; it in no way bars enforcement by the debtor. 1 Witkin, Summary of California Law (9th ed.), Contracts section 293, p.281; 20th Century Cigarette Vendors v. Shaheen (1966) 241 Cal.App.2d 391, 395. While interpretation of an oral agreement is never easy, the uncontradicted testimony of Lowers is that she specifically discussed payment of the obligations which eventually caused the problems with Fortune, and that he at first balked and then agreed to make these payments. Fortune does not dispute this conversation, but claims that only the corporation, and not himself personally, agreed to make the payments. The court finds this interpretation unconvincing, as the agreement was between Lowers and Fortune, not Lowers and the corporation, and would be illusory as to Lowers if Fortunes's interpretation is used. Fortune's subsequent comingling of personal and corporate funds and lack of observation of corporate formalities also make his claim unconvincing. There are no grounds for interpreting the Indemnity Agreement as a waiver of Lower's breach of contract claim against Fortune. The Indemnity Agreement only provided that Lowers held Fortune harmless from any liability to the plaintiff resulting from Lowers' default on her note to the plaintiff. Both Lowers and Fortune were then represented by counsel, so the court can see absolutely no reason to imply a provision in the Indemnity Agreement neither contained in it nor necessary to its implementation, especially if such an implied provision would constitute a waiver by Lowers of a valuable right. The court finds that the purpose of the Indemnity Agreement was to protect Fortune from further liability to the plaintiff, and nothing more. It was not intended to protect him from liability to Lowers. For the above reasons, the court finds that Lowers has an allowable general unsecured claim against Fortune to be calculated as follows:
a. $26,500.00 together with interest at the legal rate from August 31, 1983, to the date of the filing of the debtor's petition; plus
b. $3,750.00 together with interest at the legal rate from April 12, 1984, to the date of the petition; plus
Counsel for Lowers shall prepare a form of order consistent with this decision and submit it together with proof of service upon counsel for Fortune.
Dated: September 21, 1987 _____________________ ALAN JAROSLOVSKY U.S. BANKRUPTCY