First National Bank v. Consolidated Lumber Co.

SHAW, J.

The Newport Lumber Company, a corporation, owned -a negotiable promissory note, dated August 16, 1905,

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which hy its terms was payable on February 16, 1906. On August 31, 1905, the corporation sold and transferred the note to plaintiff, and at the same time, and in consideration of plaintiff purchasing the same, executed and indorsed upon the back of said note a guaranty of the payment thereof as follows: “For value received, we hereby guarantee the payment of the within note at maturity, or at any time thereafter, with interest at the rate of eight per cent per annum until paid, waiving demand, notice of nonpayment and protest. ’ ’ At the time of the execution of this contract of guaranty defendant was a stockholder of said corporation, Newport Lumber Company. The makers of the note failing to pay the same in full, plaintiff, on February 13, 1909, instituted this action to recover upon the statutory liability of defendant by reason of said contract of guaranty made by said Newport Lumber Company, of which defendant was a stockholder.

Plaintiff obtained a judgment and defendant appeals therefrom upon a bill of exceptions.

The only point involved on the appeal is whether or not the action was barred by the statute of limitations as declared in section 359, Code of Civil Procedure, which provides that actions against stockholders of a corporation to enforce a liability created by law shall be brought within three years after the liability is created. The question presented for determination is the time when the liability incurred by the Newport Lumber Company, under the terms of the written instrument, was created; appellant insisting that it was at the time of the purchase of the note on August 31, 1905, in which case the action was barred (Code Civ. Proc., sec. 359), while respondent contends that it was created at the time of the maturity of the note. At a former hearing of this appeal the court accepted the later view, but upon further consideration we are not satisfied with the conclusion then reached.

It is quite true that the liability incurred by the Newport Lumber Company was not enforceable until the maturity of the note and default made by the makers thereof. It cannot, however, be said that the liability was not created until such time. Liability does not depend for its existence upon the fact that it is immediately enforceable. It may exist with