Yarbro v. Neil B. McGinnis Equipment Co.
420 P.2d 163, 101 Ariz. 378, 1966 Ariz. LEXIS 354 (1966)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An oral promise to pay the debt of another is enforceable and falls outside the Statute of Frauds when the promisor's main purpose is to serve a pecuniary or business purpose of their own, rather than to merely act as a surety for the original debtor.
Facts:
- Yarbro initially attempted to purchase a tractor from McGinnis Equipment Co. but was denied financing.
- Yarbro then suggested that Russell purchase the tractor, which Russell did under a conditional sales contract.
- After Russell failed to make the first payment, Yarbro paid the September installment and made numerous subsequent oral promises to McGinnis to cover other delinquent payments.
- During the period of Russell's default, Yarbro frequently borrowed and used the tractor for work on his own ranch.
- Yarbro repeatedly asked McGinnis to forbear from repossessing the tractor because he needed it for his own use, and McGinnis delayed repossession in reliance on Yarbro's promises to pay.
- Yarbro provided two separate checks to McGinnis to cover payments, but both were returned for insufficient funds.
Procedural Posture:
- McGinnis Equipment Co. filed suit against Russell and Yarbro in the Superior Court of Maricopa County (a state trial court) to recover payments due under a conditional sales contract.
- A default judgment was entered against Russell.
- Following a trial, the court found Yarbro liable for the entire remaining balance due under the contract.
- Yarbro, as appellant, appealed the trial court's judgment to the Arizona Supreme Court.
- McGinnis Equipment Co. is the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an oral promise to pay the debt of another fall outside the Statute of Frauds when the promisor's main purpose in making the promise is to secure a direct and personal economic benefit for himself, rather than to simply act as a guarantor for the debtor?
Opinions:
Majority - Bernstein, Vice Chief Justice
Yes. An oral promise to pay the debt of another falls outside the Statute of Frauds under the 'leading object' or 'main purpose' exception when the promisor's primary motivation is to secure a direct, personal, and pecuniary benefit. The court reasoned that the Statute of Frauds is intended to apply to 'collateral' promises (acting as a surety), not 'original' promises where the promisor is, in effect, answering for his own benefit. The evidence showed Yarbro's 'main and leading object' was not to guarantee Russell's debt, but to serve his own interest by ensuring his continued access to and use of the tractor. Yarbro's promises were supported by sufficient consideration, as McGinnis's forbearance from repossession was both a detriment to McGinnis and a substantial benefit to Yarbro. However, the court modified the judgment, holding Yarbro liable only for the specific past-due installments he promised to pay, not the entire contract balance, as the evidence did not show he promised to assume the entire debt.
Analysis:
This case solidifies the 'main purpose' or 'leading object' rule as a significant exception to the Statute of Frauds' suretyship provision in Arizona. It clarifies that the inquiry is fact-intensive, requiring courts to look beyond the form of the promise to the substance of the transaction and the promisor's primary intent. The decision provides a clear example of what constitutes a 'personal, immediate and pecuniary interest' sufficient to invoke the exception—in this case, the promisor's continued use of property. It also carefully limits the scope of liability under this exception to the actual extent of the oral promise made, preventing an overbroad application of the doctrine.
