Bank of Newman v. Monterey County Gas & Electric Co.

RICHARDS, J.

is an appeal from* a judgment in favor of plaintiff in an action to recover upon a certain written agreement executed by the defendant whereby it undertook to guarantee the payment of certain bonds issued by the Monterey and Pacific Grove Railway Co., a corporation, upon which bonds default in payment had been made by said last-named corporation. The guaranty in question was indorsed upon each of the bonds issued and sold by the Monterey and Pacific Grove Railway Co., and was in the following form:

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“GUARANTY OF PAYMENT.

“For value received, Monterey County Gas and Electric Company, a corporation, agrees to and with the holder o£ this bond and the attached coupons, that if the several sums of money agreed to be paid thereby are not paid in the manner therein stated, as they severally become due, then and in that event the Monterey Gas & Electric Company will pay the same.

“This contract is duly authorized by a resolution of the board of directors of the Monterey Gas and Electric Company. ’ ’

The trial court rendered its judgment in plaintiff’s favor for the amount due upon the bonds held by it bearing this guaranty.

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The defendant has appealed from said judgment, the only contention which the appellant makes upon this appeal being that the guaranty of the said bonds of the Monterey and Pacific Grove Railway Co., by the appellant was an attempt to increase the bonded indebtedness of the guarantor; and, since said guaranty was not founded upon the proceedings required to be taken by corporations under section 359 of the Civil Code relating to the creation or increase of a bonded indebtedness,' said guaranty was void.

We are unable to agree with the position taken by the appellant in this regard. The guaranty in question appears upon its face to have been issued for value received, and there is nothing in this record to indicate that it was not issued in good faith and in the regular course of the business of the corporation issuing the same. It does not purport to have any relation to any past bonded indebtedness of the appellant, or to have been issued in the form or with the intent of creating or increasing any bonded indebtedness of the corporation; but, on the other hand, it appears as to both its form and substance to belong to that class of written instruments which include promissory notes, checks, bills of exchange, and like obligations of corporations or of individuals issued in the ordinary course of business. The term “bonded indebtedness” has never been held to apply to or include this class of obligations, but as used in the constitution and statutes has had reference to those more formal transactions of both municipal and private corpora