Case ID: ohio-st_50/html/0484-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Steering Wrench Co. et al. v. Amstutz.
    
      Corporations—Stockholders—Agreement by, to contribute to pay debts of—How en forced—Pleading.
    
    1. An agreement entered into by solvent shareholders of an embarrassed corporation, that they will severally contribute to raise a fund to pay the corporate liabilities, creates a valid obligation; and, if the share to be contributed by each is not expressly fixed by the terms of the. agreement, each should contribute in the proportion that the number of shares of stock owned by him bears to the shares held by all the contributors.
    2. Where, in such case, one of the shareholders agreed that, as part of his contribution, he would cancel and surrender a promissory note held by him against the corporation and a part or all of the other contributing shareholders, for a corporate debt, and such other contributors have performed the agreement on their part, they and the corporation'may set up the contract in bar of a recovery in an action brought upon such note.
    3. Where facts sufficient to defeat the plaintiff’s right of recovery appear in an answer, it is error to sustain a demurrer to it, however uuskillfully the material facts may be arranged with reference to each other, or with reference to other and immaterial facts.
    (Decided June 20, 1893.)
    Error to the Circuit Court of Wayne county.
    Defendant in error brought an action in the Court of Common Pleas of Wayne county, on' a promissory note, against The Sterling Wrench Company, the maker, and a number of its stockholders, as guarantors thereof.
    The plaintiffs in error set up in bar of a recovery on the note the following amended answer:
    “ The defendants now come and on leave of court file this, their amended answer, and say that said Sterling Wrench Co. is incorporated as stated in the petition, and that said note was executed as stated in the petition.
    
      “ The defendants further say that on or about the first day of April, 1887, the said plaintiff was a member and stockholder of The Sterling Wrench Co., together with said defendants herein, and that at said time The Sterling Wrench Co. was greatly embarrassed and in debt in the sum of about $30,000, which said $30,000 was made up of this note sued upon in the petition, and other notes on which plaintiff was a joint maker in the sum of about $3,000. That on or about the first day of April, 1887, the said Sterling Wrench Co. and said defendants herein, together with the plaintiff, as sureties, having theretofore executed and delivered their joint note to the Phcenix National Bank of Medina for the sum of about $3,000, with accrued interest, and the said note then being due and not paid, the plaintiff herein and the defendants, all being members and stockholders oí The Sterling Wrench Co., called a meeting to devise plans for liquidating their indebtedness and avoiding litigation by suits then threatened to be brought against The Sterling ^rench Co., the plaintiffs and the defendants herein; that at said time all of said thirty thousand dollars indebtedness was then due; that plaintiff was liable, as a joint maker with the defendants herein on said note, to the Phcenix National Bank of Medina. That said defendants were indebted to him in the sum of about $2,000 as represented by the note set out in the petition; that at said date the plaintiff and one Steiner were the only members of and stockholders of said company who had advanced any money to said company individually ; that said Steiner, as payee, had a note of even date and of like amount of the note sued upon herein, made and executed by the same defendants.
    “ That at said date it was mutually agreed, in order to save The Sterling Wrench Co. and the defendants herein from the threatened law suit on said notes, aggregating about $30,000, and to save said defendants and the plaintiff herein from the threatened law suits for the collection of said $3,000 note made to the Phoenix National Bank of Medina, as aforesaid, which said note was one of the notes included in said aggregate debt of $30,000, that if the plaintiff and said Steiner would surrender, cancel and hold for naught their said notes made to them and 'Signed by the same payers which signed the note set out in the petition, the stockholders of said company, who were liable for said debts, agreed to pay off and liquidate all outstanding debts and to pay the note to the Phcenix National Bank of Medina, of which said plaintiff was a joint maker, and relieve plaintiff from further responsibility, if he, the said plaintiff, would no longer seek to hold said defendants herein on the note set out in the petition. And that said John C. Steiner then and there also agreed that he would not hold his note, which is like the note set out in the petition against said defendants herein, as a valid claim, if said stockholders of said Sterling Wrench Co. would liquidate the debts of said company in the manner aforesaid.
    “That at the date aforesaid, the company being indebted in the sum of about $80,000 as aforesaid, many of the stockholders of said company being totally irresponsible for their debts and owning a large amount of the capital stock of said company, the said plaintiff herein and the said John C. Steiner, Daniel Amstutz, C. E. Steiner, Joseph Ross, Jacob Krause, Christian Krause, A. A. Burkholder, Ered Amstutz, John Amstutz and Joseph Amstutz, being the only responsible members of said compan}*-, owned about 55 per cent, of the capital stock of said company. That it was' then and there mutually agreed by plaintiff and the defendants that if the said plaintiff and the said John C. Steiner would cancel their debts, which is the note set out in the petition aiid said note held by said John C. Steiner, heretofore described herein, being an indebtedness against the said company and said defendants, and contribute the same as a part of their aliquot share towards liquidating the whole of said indebtedness; that thereupon the said plaintiff and the said John C. Steiner did agree and accept the terms hereinbefore mentioned ; that John C. Steiner has wholly and fully carried out the terms of his said agreement, and has caused his said note to be canceled by way of contribution to the payment of said debts. And as addition thereto paid his aliquot proportion to the amount of about $5,000, including said note, and has fully liquidated his share of the indebtedness as he had then and there agreed to do pursuant to said agreement and understanding with the plaintiff and said stockholders of said company, and, in pursuance to said agreement said stockholders who were responsible and relied upon the promises of the plaintiff to contribute said note and such further sum of money as would be necessary for the plaintiff to fully liquidate his share of the indebtedness of said corporation, did pay off and fully liquidate said note for which plaintiff was liable as a joint maker to the Phoenix National Bank of Medina, Ohio. That said defendants herein, said stockholders of said company, would never have advanced money to liquidate said note on which the said plaintiff herein was liable as a joint maker to the Phoenix National Bank of Medina, if they had not fully believed that said plaintiff would perform his part of said agreement. That in consideration of the promise of the plaintiff, said defendants herein did stop the threatened suits about to be commenced against said company, these defendants and the plaintiff, which they would not have done, if they would not have relied wholly upon the promises of the plaintiff to contribute said note as he has agreed to do and the further sum necessary on the part of plaintiff to be contributed to liquidate said indebtedness, for which he was also liable with the defendants herein. The defendant further says that all of said stockholders did contribute towards the liquidation of said indebtedness as they had agreed to do, and relied upon the statements and agreement of the plaintiff, which they would not have done had they believed that the plaintiff would not perform his part of the agreement to be performed by him; and, by reason of the plaintiff not fulfilling his portion of said agreement, his proportionate share of said debts of said company, for which he was liable, as a joint maker, are as yet unliquidated. That the plaintiff was at the time he made the said agreement, and is now, and ever since has been able financially to pay and liquidate his proportion of said indebtedness as he agreed to do, and that the pretending to hold said note as a valid claim against defendants herein is in fraud of the rights of the defendants herein, and is by reason of the premises merely a sham and pretended claim of liability due him from the defendants, and it has been fully liquidated and paid in the manner aforesaid, and the defendants therefore pray, by reason of the premises and the facts set forth herein, that said note sued on be ordered to be delivered up to be canceled, and that in default of canceling the same the order and decree of this court stand for such cancellation. And by reason of the premises and the facts stated the defendants deny each and every allegation in the petition not admitted to be true.”
    To this answer a demurrer was interposed and sustained. No further pleadings were had, and judgment was rendered against the plaintiffs in error for the amount due on the note; this judgment having been affirmed by the circuit court, the cause was brought here for review.
    
      Yocum & Taggart and John McSweeny, Jr., for plaintiffs in error.
    
      Johnson & Taylor, for defendant in error.
   By the Court.

An inspection of the amended answer will disclose an attempt to set forth an agreement, by the terms of which the defendant in error was to cancel and surrender the promissory note upon which this action was founded; the statement of the terms of the alleged agreement wants precision and clearness, while the acts of performance on the part of the plaintiffs in error, as well as the breach of the contract by the defendant in error, is still more obscurely stated, and the mind is left in doubt whether the answer is the product of an inartistic and careless effort to set forth a bona Jide defense, or an artful attempt to arrange facts insufficient for that purpose so as to give them the appearance of constituting a valid defense. That doubt in this case, as in all cases where the contrary purpose is not fairly apparent, should be resolved in favor of an' honest purpose; and under the liberal rules for the construction of pleadings, favored by the code of civil procedure, the answer should be held sufficient if it contain the necessary facts, however awkwardly they may be stated.. The amended answer when tried by this test we think is sufficient. It shows, among other things, that the defendant in error was a solvent stockholder of The Sterling Wrench Company, a body corporate under the laws of the state; that the corporation, although its insolvency was not averred, was embarrassed by a heavy debt, which was due, and actions for its collection threatened; that the defendant in error was personally liable as a joint maker of a note representing $3,000.00 of this debt; that all of the solvent stockholders of the concern, including the defendant in error, agreed among themselves to pay off its entire debt; the defendant in error agreeing to cancel and surrender the note in suit as a part of the aliquot share to be contributed by him for that purpose. This was an original contract made by and between parties financially interested in the success of the concern, to accomplish a lawful object beneficial to each of them. Even if the mutual promises were not sufficient considerations for each other to make them binding obligations, while wholly executory, yet, after full performance by some of the contracting parties, those so performing could maintain an action upon the contract against those in default.

If claim should be made that the contract was too indefinite to support an action, in that it did not fix the aliquot share to be contributed by each shareholder, towards paying the debt, reply may be made that in the absence of an express stipulation in respect thereto, it would be held that each party should contribute such proportion of the entire debt as his stock bore to the stock of all the contributors. That inquiry, however, is not important Here, because it is averred, and the demurrer admits, that the whole amount, except the share of the defendant in error, has been contributed, and it also appears that the share of the defendant in error is at least equal to the note in suit; for the answer alleges that he was to contribute the amount of the note in suit, as a part of his aliquot share.

The full performance, by the other contracting parties, of their obligations under the contract, is expressly averred it being stated in direct terms that they “did stop the threatened proceedings; ” * * * “ that all of said stockholders did contribute towards the liquidation of said indebtedness as they had agreed to do; ” * * * that they “ did pay off and fully liquidate said note,” * * * upon which the defendant in error was liable as a joint maker, and that “ by reason of the plaintiff not fulfilling his portion of said agreement, his proportionate share of said debts of said company, for which he is liable as a joint maker, are as yet unpaid.” If this is true, the contracting parties, other than the defendant in error, have fully performed their part of the agreement, and all the debts of the concern are paid except some portion of that which he was to pay. If these facts are true, and the demurrer admits their truth, the conditions upon which the defendant in error was to cancel and surrender the note in suit have been fully performed, and their performance constitutes a good equitable defense to an action founded thereon.

Judgment reversed, and cause remanded Jor further proceedings.