65 P. 68 | Cal. | 1901
Lead Opinion
Upon the hearing of this case in Department Two, the following opinion was rendered: —
"This is an action by plaintiff to enforce the statutory liability of the stockholders for a debt of the corporation. Judgment passed for defendants; plaintiff moved for and obtained an order granting him a new trial, and from that order defendants appeal. The complaint, so far as is necessary for the consideration of the questions here presented, shows that the Consolidated Piedmont Cable Company, a corporation, borrowed from the Oakland Bank of Savings, upon its corporate note, the sum of ten thousand dollars. Before delivery of the note, Mrs. Phœbe Blair placed her name upon the back thereof as an accommodation indorser. In time, Mrs. Blair was called upon to pay the note, and did so. Upon payment, she took from the bank an assignment of the note, `and all its rights and interest thereto, and all moneys due or to grow due thereon, and all rights of action which said bank had or held against the said Consolidated Piedmont Cable Company, and against the stockholders of said corporation, created or existing in favor of said bank by reason of said loan.' Mrs. Blair in turn assigned and transferred to *576 one Black the promissory note and all rights and interest therein, and to all moneys due and to grow due thereon. Black brought an action against the corporation, and recovered judgment against it for the amount so paid by Mrs. Blair, with interest. Thereafter Black and Mrs. Blair executed and delivered to the plaintiff an assignment of all their right, title, interest, and estate in and to the judgment, to the note, and to any and all rights of action against the stockholders of the Consolidated Piedmont Cable Company, created or existing by reason of the loan made by the bank. Issue was joined upon these averments, and the court found, as matter of fact, that with the note the bank's right of action against the stockholders had been assigned to Mrs. Blair. This finding of fact, being in plaintiff's favor, was, of course, not assailed by him upon his motion for a new trial, and therefore, so far as it may justly be considered a finding of fact, it is not open to question on this appeal. The court further found the assignment by Mrs. Blair to Black to have been as pleaded in the complaint and above set forth. It next quoted at length the written assignment made by Black and Mrs. Blair to this plaintiff, which, in terms, was an assignment of the judgment and of the promissory note, and found that neither Black or Mrs. Blair had assigned to plaintiff any right of action against the stockholders of the corporation upon account of the debt. This last finding was challenged by plaintiff in his motion for a new trial, and is the one which here invites particular consideration.
"Mrs. Blair being an accommodation indorser upon the note so far as the bank, the actual payee of the note, was concerned, she became charged with the duties and vested with the rights of an indorser. (Civ. Code, sec.
"It is, then, as has been said, upon the question of the nature and extent of the rights of sureties under the indicated circumstances that counsel so widely differ. Upon the part of respondent it is insisted that whether Mrs. Blair be regarded as an indorser or as a surety, equity countenances an assignment of the principal debt paid by the surety, and will keep it alive for all purposes necessary to her protection in the collection of her demand against the principal; that, being thus subrogated to the bank, she is clothed with all its rights and remedies, and vested with the right to enforce all of the securities which the bank itself possessed; and that, therefore, as the right of action of a creditor of the corporation against the stockholders is in its broad sense a security for his debt, under subrogation and equitable assignment she was vested with the same right to prosecute actions for contribution against the stockholders which the bank itself had formerly enjoyed.
"As against this, appellants contend that as Mrs. Blair was in law nothing more than a surety, upon the payment by her in full of the principal's obligation, ipso facto that obligation wasextinguished (Civ. Code, sec.
"In this state, as early as 1862, in the case of Chipman v. *579 Morrill,
"But as the liability of the stockholder to contribution for a payment of a corporate debt presupposes the existence of such debt, it must necessarily follow that when the corporation debt is extinguished the statutory liability of the stockholders at once ceases. So that in the present case, as matter of law, the debt having been extinguished by the surety's payment, the liability of the stockholders upon that debt came to an end, and neither under the doctrine of equitable assignment nor of subrogation could it have been transferred as a live and subsisting obligation to Mrs. Blair. For, as has been said, upon the full performance by Mrs. Blair the old liability was extinguished, and a new liability sprang up against the corporation and its stockholders, — a liability growing out of her contract of suretyship to reimbursement for what had been expended, including necessary costs and expenses. It was a new debt of the corporation, having its creation in and at the time of the payment by Mrs. Blair, and concurrently with the creation of this new debt came into existence a new liability upon the part of the then stockholders of the corporation for their contributory share of the amount of the debt thus due to Mrs. Blair."
Upon the rehearing of this cause the court has been urged to reconsider the views above expressed. Under our system of pleading, where all the facts of the transaction are set out, it can make little difference, in the generality of cases, whether it be said that an accommodation maker or indorser who has been compelled to meet the obligation of his principal is entitled to sue upon the note, with a recovery limited to the amount which he has expended, with legal interest, or whether it be said that his action is in assumpsit for money laid out on behalf of his principal, and that his recovery is measured by the amount he has so expended, with legal interest. But in this case the question becomes of consequence for the following reason: Plaintiff is seeking to enforce the stockholders' liability for the debt of the corporation against those who were stockholders at the time when the note in question was executed. If it be held that only these stockholders are liable, the next case to come before us may be one in which the statute of limitations has *581 run against such stockholders, and where the surety will urge with unanswerable force that when, and only when, he paid the debt of the corporation did a liability upon the part of the corporation to him arise, and insist upon his right of action against those who were stockholders at the time when the corporation became indebted to him. We think, therefore, that the law and the logic of the case can lead but to one conclusion; that the surety's right of action is, in strictness, not upon the note, but is in implied assumpsit for moneys paid out and expended, and that as to the stockholders, the surety's right of action is against those who were stockholders at the time when the corporation's liability to the surety was incurred.
Upon the rehearing, for the first time, it was pressed upon the court's notice that all the facts were set up in the complaint, and that as to the stockholders, it was pleaded not only that they were stockholders at the time the corporation gave its note to the bank, but that they continued to be such afterward, and that, in the absence of a special demurrer, here is a sufficient averment, by implication, that they were stockholders at the time when Mrs. Blair paid the corporation's debt (Williams v. Ashe,
It is therefore ordered that the order appealed from be affirmed, with leave to the respective parties to amend their pleadings if they shall be so advised, the appellants to have their costs upon this appeal.
Temple, J., McFarland, J., and Garoutte, J., concurred.
Beatty, C.J., concurred in the judgment, except as to the costs.
Concurrence Opinion
I concur in the judgment, and in much of the opinion of Mr. Justice Henshaw. I do not, however, assent to that portion of the opinion in which it is held that upon the payment of the note to the bank by Mrs. Blair the obligation of the maker of the note was extinguished, nor to the construction given to section *582
In order that an obligation may be extinguished, under the provisions of this section there must be a full performance of it by the party "whose duty it is to perform it," or such performance, if by any other person, must be "on his behalf and with his assent," and the obligation which is thus extinguished is that of the person whose duty it was to perform it. In the present case it is not shown or claimed that the payment of the note to the bank by Mrs. Blair was either at the request or with the assent of the corporation, and it is equally manifest from the terms of the note and the character of the transaction that the "duty" of paying the note rested upon the corporation, and not upon Mrs. Blair. The note was, by its terms, the obligation of the corporation, and the entire consideration therefor was received by it. As an indorser of the note, Mrs. Blair became liable to the bank for its payment in case the corporation should fail to pay it, and she should be properly and legally charged therefor. This conditional obligation was the only one which it was the duty of Mrs. Blair to perform, and upon her payment to the bank the only obligation which was extinguished was this conditional obligation. As payment of the note has never been made by the corporation, or by any one on its behalf or with its assent, its obligation created by the note has never been extinguished.
The obligation of the corporation was not extinguished by the payment to the bank by Mrs. Blair, but she thereby became subrogated to all the rights for the enforcement against the corporation of its obligation, that had existed in favor of the bank, or, as was said in Waldrip v. Black,
Whether an accommodation indorser, upon being compelled to pay the note, becomes entitled to the note, and may maintain an action thereon against the maker according to its tenor, or an action merely in assumpsit for the amount paid by him, has been the subject of much controversy. That he may maintain an action in assumpsit has never been controverted; the principal dispute being whether, in an action upon the note, he can recover the full amount thereof, as was held in Fowler v. Strickland,
The question is not material in the present case, as the right of action against the stockholders is in no case upon the note(Bank of San Luis Obispo v. Pacific Coast S.S. Co.,
Van Dyke, J., concurred in the opinion of Harrison, J.