Thomas A. Armbruster, Inc. v. Barron - 341 Pa. Super. 409, 491 A.2d 882 (1985)

Rule:

Whenever the main purpose and object of the promisor is not to answer for the debt of another, but to subserve some pecuniary or business purpose of his own, his promise is not within the statute of frauds, although it may be in form a provision to pay the debt of another.

Facts:

Appellant, Eugene Barron, and two others, were officers and sole shareholders in the RBR Corporation. The primary purpose of RBR was to construct a bowling alley. Each of the principals owned a one-third interest in the corporation. In March 1979, Thomas A. Armbruster, Inc., a general contractor, entered into a construction agreement with RBR to build the bowling alley. However, several days after, Armbruster discovered that RBR did not own the land upon which the bowling alley was being constructed, and also that RBR had not yet obtained financing for the project. In a May, 1979 meeting, Armbruster’s attorney requested appellant and one of the other principals to personally guarantee the corporation's debt in consideration of Armbruster's promise to proceed with construction. Appellant offered to personally guarantee the corporation's debt and stated that he would put up his taproom as security. He expressed his belief that the corporation would receive financing in thirty to sixty days. In a suit to enforce appellant’s oral agreement to guarantee the corporation’s debt, the trial court held that the oral agreement was enforceable. Appellant argued that since the guaranty he made was oral, it was unenforceable due to the Statute of Frauds.

Issue:

Was the oral guaranty barred by the Statute of Frauds? 

Answer:

No.

Conclusion:

The court affirmed the judgment of the trial court, holding that the guaranty was hardly a gratuitous or sentimental gesture by appellant, but was motivated by a rational business judgment, and appellant's promise was not made merely to aid a proven business but to insure the very financial success of a new enterprise. Thus, the case fell within the leading object rule and that the oral guaranty was not barred by the Statute of Frauds.