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Rouse v. United States - 94 U.S. App. D.C. 386, 215 F.2d 872 (1954)

Rule:

One who promises to make a payment to the promisee's creditor can assert against the creditor any defense that the promisor could assert against the promisee. If a promisor's agreement is to be interpreted as a promise to discharge whatever liability the promisee is under, the promisor must certainly be allowed to show that the promisee was under no enforceable liability. On the other hand, if the promise means that the promisor agrees to pay a sum of money to A, to whom the promisee says he is indebted, it is immaterial whether the promisee is actually indebted to that amount or at all. Where the promise is to pay a specific debt this interpretation will generally be the true one. 

Facts:

Bessie Winston gave Associated Contractors, Inc., her promissory note for $ 1,008, payable in monthly installments, for a heating plant in her house. The Federal Housing Administration guaranteed the note, and the payee endorsed it for value to the lending bank, the Union Trust Company. Winston then sold the house to defendant appellant Rouse. In the contract of sale Rouse agreed to assume debts secured by deeds of trust and also to assume payment of $ 850 for heating plant payable $ 28 per month. Nothing was said about the note. Eventually, Winston defaulted on her note and plaintiff appellee United States (US) paid the bank, took an assignment of the note, demanded payment from Rouse, and sued him for $ 850 and interest. Rouse alleged as defenses that Winston fraudulently misrepresented the condition of the heating plant and that Associated Contractors did not install it satisfactorily. The District Court, however, struck these defenses and granted summary judgment for the US. Rouse appealed.

Issue:

In an action by plaintiff guarantor United States to collect a debt from defendant home buyer, was the defendant entitled to allege defenses of fraudulent misrepresentation?

Answer:

Yes

Conclusion:

The United States Court of Appeals for the District of Columbia Circuit reversed the grant summary judgment in the US' favor. The trial court erred in concluding that defendant Rouse was not entitled to assert the defense against plaintiff US that the home seller, whose debt Rouse had assumed, had engaged in fraudulent misrepresentation. First, the Court noted that Rouse never signed the note and thus was not liable on it. Next, the Court held the trial court had erred in striking Rouse's alleged defense that the seller had fraudulently misrepresented the condition of the heating plant. Rouse was entitled to assert against the seller's creditor any defense that he could have asserted against the Winston herself: One who promises to make a payment to the promisee's creditor can assert against the creditor any defense that the promisor could assert against the promisee. The Court, however, noted that Rouse could not entitled assert a defense arising out the installer's work.

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