Spreckels v. Butler

HARRISON, J.

The defendants are stockholders in the “S. S. Construction Company,” a corporation, and the plaintiff is the holder of a promissory note executed hy the corporation to-one Foerster for money received hy it from him while the defendants were such stockholders, and seeks by this action to-recover from them their = proportion of the indebtedness for which the note was given. Judgment was rendered in favor of the plaintiff, from which the defendants have appealed.

The complaint sets forth the plaintiff’s cause of action in three counts, the first alleging that on the 26th of January, 1892, the corporation became indebted to Foerster in the sum. of fifty thousand dollars for money loaned and advanced to it by him for use .in its ordinary business, which it agreed to repay to him with interest at the rate of eight per cent per annum, and that on the same day Foerster sold, assigned, and transferred to the plaintiff all his claim and demand against both the corporation and the defendants as stockholders therein. The second count, after alleging the loan of the money by Foerster, alleges that on that day, and as evidence of said indebtedness, the corporation executed its promissory note to him for said amount, paj'able one year after date, with interest at the rate of eight per cent per annum, and that thereafter on the same day Foerster indorsed and delivered the note to the plaintiff. The third count alleges the loan of money by Foerster to-the corporation, and that he thereupon assigned and transferred to the plaintiff all the indebtedness then due and owing, or thereafter to become due and owing by reason of said indebtedness against the corporation and against the defendants as stockholders therein. Appropriate allegations are made in each of the counts of the amount of the capital stock held by each of the defendants, and that the note, as well as the indebtedness represented by it, were unpaid.

At the trial the following facts were shown on behalf of the plaintiff: In the early part of January, 1892, the defendant

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Buck, who was a stockholder in the corporation, solicited and obtained from the plaintiff a promise to loan the corporation the sum of fifty thousand dollars. As the plaintiff was about to leave the city for several days, and might not return before the corporation would require the money, he drew his check on January 15th for that amount of money on the Bank of British Columbia in favor of Buck, who gave it to him for that purpose. Buck deposited the check to the credit of the firm of E". Ohlandt & Co., of which he was a member, in the Anglo-Californian Bank, on the 18th of January, and on the same day it was paid by the Bank of British Columbia through the clearinghouse. Foerster was a member of the law firm of Morrison & Foerster, who appear to have acted as the legal advisers of the corporation in this transaction, and on January 20th a resolution was passed by the board of directors of the corporation authorizing its president and secretary to execute and deliver to him its promissory note bearing date January 26, 1892, in the form which is set forth in the complaint. Before that date the plaintiff had returned to San Francisco, and was present at the completion of the transaction at the law office of Morrison & Foerster, where some of the defendants were also present. The note had been previously drawn up in accordance with a resolution of the board of directors, and on the 26th was at the office of Morrison & Foerster, but in whose custody does not appear. A check of E". Ohlandt & Co. for the amount of the note had been drawn on that day to the order of Behrend Joost, who was the general manager of the corporation, and by him indorsed to the order of Foerster. The check was thereupon indorsed by Foerster to the order of the corporation, who received from it its note executed as above, which he immediately indorsed in blank, adding the words “without recourse to me,” and delivered to the plaintiff. The corporation afterward collected the check and used its proceeds in its ordinary business.