Waldron v. Lyon

California Court of Appeal Jun 4, 1928 No. Docket No. 6295.Published

Before: Campbell

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Holding. The court held that indorsers who pay a corporate debt acquire a new, independent cause of action against the corporation's stockholders by operation of law, distinct from the original promissory note. Furthermore, a stockholder may recover their pro rata share of corporate indebtedness from other stockholders even if the plaintiff is also a stockholder.

Issues

Whether an action against stockholders can be maintained after the underlying promissory notes were paid by indorsers.
Whether a stockholder may recover a pro rata share of corporate indebtedness from other stockholders.
Whether the evidence supported the finding that a corporate debt payment was made at the instance and request of the corporation.

Disposition. affirmed

Quotations verified verbatim against the opinion

“plaintiff’s action is not on the notes, but on a new and original obligation which arose ipso facto by operation of law when the notes and the obligations evidenced thereby were paid by the indorsers of the notes.”

“The cause of action against the stockholders, although arising at the same time as that against the corporation, is entirely independent of the cause of action against the corporation”

CAMPBELL, J.,

pro

tem.

This is an appeal from a judgment entered severally against the defendants, and from such judgment defendants A. E. Wallace, J. W. Harriman, Sam McKee, and C. Pederson have appealed.

[402]

The complaint alleges and the court found the following facts: That on or about June 20, 1923, Shallow Field Oil Company became indebted to the Marine Trust & Savings Bank of Long Beach for money loaned in the sum of $15,000, for which Shallow Field Oil Company delivered to such bank its promissory note, which note was indorsed by Andrew N. Waldron, Herbert Jutson, Thos. H. Waldron, M. V. Housman, F. S. Brennan, J. K. Hull, Libbie S. Lotz, F. B. Steen, W. F. Pascoe, C. I. Thorpe, and J. H. Sleeper; that the note was so indorsed for a valuable consideration ; that at maturity the note was presented for payment to Shallow Field Oil Company, but no part thereof was paid, and suit was brought upon the note and judgment by default was entered against the maker and indorsers of the note, and each of them became obligated to pay, and indorsers Herbert Jutson, M. y. Housman, F. S. Brennan and Libbie S. Lotz paid the amount due to Marine Trust & Savings Bank; that on or about December 11, 1922, Shallow Field Oil Company became indebted to the Marine Trust & Savings Bank of Long Beach for money loaned in the sum of $10,000, for which Shallow Field Oil Company delivered to such bank its promissory note, which note was indorsed by J. K. Hull, F. S. Brennan, M. y. Housman, W. F. Pascoe, John H. Sleeper, F. B. Steen, and Thos. H. Waldron; that this note was indorsed for a valuable consideration and at maturity was presented for payment to Shallow Field Oil Company, but no part thereof was paid, and suit was brought upon the note, and a default judgment was entered against the maker and indorsers of the note, and each of them became obligated to pay, and indorsers Herbert Jutson, M. y. Housman, F. S. Brennan, and Libbie S. Lotz paid the amount due to the bank; that on or about February 2, 1922, Shallow Field Oil Company became indebted to one John K. Hull, trustee, for money loaned in the sum of $3,500, for which Shallow Field Oil Company delivered to John K. Hull, trustee, its promissory note; that Shallow Field Oil Company within three years prior to the filing of the complaint became indebted to A. W. Wallace in the sum of $750, George Edwin in the sum of $250, I. N. Wining in the sum of $350, Pugh-Miller Drilling Company in the sum of $5,000, and that prior to the commencement of the action the indorsers Herbert Jutson,

Waldron v. Lyon

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CAMPBELL, J.,

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THE COURT.

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