163 P. 884 | Cal. | 1917
Appellant was indebted to the American-Hawaiian Mahogany Lumber Company, a corporation, in which he was a stockholder. His indebtedness was evidenced by his promissory note. The corporation became financially involved to such an extent that it was insolvent. It owed one C. Bolte about eight thousand dollars for money advanced by him. It owed other smaller indebtednesses. It had entered into contracts which it could not fulfill, and under one of these it apprehended a serious liability for damages. A special meeting of the stockholders was held under these circumstances and the principal creditor, Mr. Bolte, offered to take over the assets of the company in satisfaction of its indebtedness to him, and to assume all the liabilities of the company, and to guarantee protection to the individual stockholders against their stockholder's liability. A modification of this offer was tendered by the stockholders and accepted by Mr. Bolte. Under this modified agreement all of the assets of the corporation were to be made over to Mr. Bolte and retained by him under his guaranty, saving two notes and their proceeds, one of these being the note of the defendant here in *554 suit. Touching these notes and their proceeds it was agreed that Bolte should transfer them to respondent, as trustee for all the shareholders of the company, excepting himself. The proceeds of the notes when collected were to be distributed ratably amongst all the stockholders saving himself. The appellant as a stockholder executed this agreement and two-thirds of the stockholders joined therein. The note was indorsed by Bolte to the respondent after maturity, and respondent's title to the note and his right to proceed in this action, which is for the collection of it, is based wholly upon the agreement above set forth between Bolte and the stockholders of the corporation.
The defense to the action was that this agreement between Bolte and the stockholders was void, in consequence of which this respondent acquired no title to the note. The court found and concluded that the trust agreement was violative of section 309 of the Civil Code, but that appellant, maker of the note, who as a stockholder had entered into the agreement, was estopped to deny its validity. It therefore gave judgment accordingly, from which judgment this appeal is taken.
The language of our law and of our decisions permits of no doubt but that this attempted method of distributing a portion of the capital stock of the corporation was illegal and void. Section 309 of the Civil Code forbids it. Section
The conclusion is therefore not to be avoided that in so far as this trust agreement contemplated the division by the respondent of the proceeds of these notes, the agreement itself was illegal and void, as the court found. But does this conclusion vitiate the whole contract and thus destroy plaintiff's right of action? We think not, and our conclusion is based upon the fact that the agreement between Bolte and the stockholders contains two severable and distinct objects. It is both familiar and declared law (Civ. Code, sec.
Appellant's position is sound, that he is not estopped by virtue of his written assent to this illegal contract, from urging its invalidity here. No ratification or attempted ratification can validate such a contract as this, denounced by both our civil and our criminal law, nor silence an objector to its enforcement, even though he may originally have assented thereto. (Visalia etc. Co. v. Sims,
The judgment appealed from is therefore affirmed.
Lorigan, J., and Melvin J., concurred.
Hearing in Bank denied. *556