Case Name: FRANTZ v. IDAHO ARTESIAN WELL AND DRILLING COMPANY
Court: Idaho Supreme Court
Jurisdiction: Idaho
Decision Date: 1896-12-03
Citations: 5 Idaho 71
Docket Number: 
Parties: FRANTZ v. IDAHO ARTESIAN WELL AND DRILLING COMPANY.
Judges: Morgan, C. J., and Sullivan, J., concur.
Reporter: Idaho Reports
Volume: 5
Pages: 71–76

Head Matter:
(December 3, 1896.)
FRANTZ v. IDAHO ARTESIAN WELL AND DRILLING COMPANY.
[46 Pac. 1026.]
Loan of Stockholders to Corporation — Corporation’s Liability.— The defendant, a corporation, having a judgment rendered against it upon which the sale of its property was imminent, not being able to procure money to satisfy said judgment upon its own credit, the money was raised by certain stockholders upon their individual note, tlie corporation agreeing' to protect them from the payment of said note. The corporation paid a portion of said note; the balance was paid by the individuals. Held, that the corporation was liable to tbe parties so praying for the amount paid by them. And the cause of action accrued at the time said payments were made.
Statute oe Limitations. — The statute of limitations is a personal privilege, and, to be made available, must be pleaded. It cannot be interposed by argument or inference.
(Syllabus by the court.)
APPEAL from District Court, Bannock County.
H. Y. A. Ferguson, for Appellant.
In August, 1891, the defendant corporation was a judgment debtor, and was in danger of losing all its personal property by an execution sale. It had no money in its treasury, and, as a corporation, it was unable to effect a loan adequate to its needs, it had repeatedly attempted to make a loan and had failed. Among others, it applied to the First National Bank of Poca-tello. The bank, through its cashier, M. C. Senter, Esq., informed the representatives of the corporation that it would not accept the corporation as security for a dollar; but it also informed them, in substance, that if the3r individually wished to procure a loan of money they could have it; that the bank considered them responsible citizens, and would cheerfully take their individual or joint paper. It appears that these preliminary facts were laid before the corporation at what is denominated in the corporation’s minute-book a “stockholders’ ” meeting. It appears further that it was suggested that certain persons borrow money themselves and loan it to the corporation, or that certain persons volunteered to borrow money themselves and loan it to the corporation, upon the understanding that the corporation, being thereto authorized by resolution, would make and deliver its note to these private parties for the amount they loaned it, and secure the payment of said note by a chattel mortgage upon all the corporate property and effects. If the money was paid at “the special instance and request of the defendant,” he must do one of two things: show an actual request by competent evidence, or show a state of facts which in law amounted to a request, and which it was necessary to regard in order to do substantial justice between the litigants, although, before the law will imply a request, there must have been duress of person or property, or a voluntary pajonent supplemented by an express-promise to pay, ot a legal liability to pay the debt or answer for the default or miscarriage of another. (Keith v. Easton Congregational Parish, 21 Pick. (Mass.) 261; Nicholls v. Buclcman, 117 Mass. 488; Smart v. White, 88 Mo. 5G6; Kenan v. Holloway,, 16 Ala. 53, 50 Am. Dec. 1621; Wolff, v. Matthews, 39 Mo. App. 376; Hale v. Huse, 10 Gray (Mass.), 99; Reeves v. Goff, 3 N. J. L. 194; Hogg v. Longstreet, 97 Pa. St. 255.) There was no privity, no contractual relation, between the plaintiff, his assignor and the defendant corporation. There can be no recovery unless it can be shown that the money has been received by the defendant or its agent. (Coates v. Bainbridge, 5 Bing. 58, 15-Eney. Com. L. 368; Brent v. Davis, 9 Md. 217; Isom v. Johns. 2 Munf. (Va.) 272; Rush v. Good, 14 Serg. & E. (Pa.) 226; Allen v. South Boston R. Co., 150 Mass. 200, 15 Am. St. Eep. 185, 22 N. E. 917; Sterling v. Ryan, 72 Wis. 36, 7 Am. St. Eep. 818,. 37 N. W. 572; Cobb v. Curtiss, 8 Johns. 470; Allen v.- Woodward, 22 N. H. 544; Walker v. Conant, 69 Mich. 321, 13 Am. St. Eep. 391, 37 N. W. 292; Stoudt v. Hine, 45 Pa. St. 30; Westcott v. Sharp, 50 N. J. L. 392, 13 Atl. 243; National Bank v. Grand Lodge, 98 D. S. 123.) If the mortgage was valid, then, the law is clear; the plaintiff and his associates in the obligation should have foreclosed their mortgage before bringing their suit at law. (Barbieri v. Ramelli, 84 Cal. 154, 23 Pac. 1086, and eases cited. See, also, 2 Morawetz on Corporations, see. 627, on ratification of directors’ acts by the corporation.)
Thomas F. Terrell, for Eespondent.
The liability of the corporation need not be founded on written contract, but upon the duty the law imposes, from benefits it has received. (Morawetz on Private Corporations, secs. 526, 715, 716; Beach on Private Corporations, secs. 422, 423, 425; Clark on Contracts, 286, 287; 27 Am. & Eng. Eney. of Law, 371-374, and notes following each page; Memphis etc. R. R. Co. v. Dow, 19 Fed. 388; Sherman Center Town Co. v. Morris, 43 Kan. 282, 19 Am. St. Eep. 134, 23 Pac. 569; Seeley v. San Jose etc. Co., 59 Cal. 22; San Francisco Glass Go. v. San Francisco, 9 Cal. 453; Argenti v. San Francisco, 16 Cal. 256; Santa Cruz R. R. Go. v. Spreckels, 68 Cal. 193-199, 3 Pae. 661, 802; Topeka Primary A. U. B. Co. v. Martin, 39 Kan. 750, 18 Pac. 941; State Board of Agriculture v. Citizens' St. By., 47 Lid. 407, 17 Am. Rep. 702; Dill v. Wareman, 7 Met. (Mass.) 438; Waitz v. Ormsby Co., 1 Nev. 370; Slater Woolen Co. v. Lamb, 143 Mass. 420, 9 N. E. 823; Oneida Bank v. Ontario Bank, 21 N. Y. 490; Rider Life Baft Co. v. Roach, 97 N. Y. 378.) Where directors or stockholders of a corporation give their individual note to a bank, either directly for money or as collateral for money delivered to and used by the corporation, as between the corporation and the persons who gave the note to the bank, the relation of principal and surety exists. (Street v. Old Town Bank of Baltimore, 67 Md. 421, 10 Atl. 319.) The right to interpose the plea of the statute of limitations is waived, unless taken advantage of by demurrer or answer. (Reagan v. Justice Court,' 75 Cal. 253, 17 Pae. 195; Kelley v. Kriess, 68 Cal. 211, 9 Pac. 129; Gration v. Wiggins, 23 Cal. 16; Osment v. McElrath, 68 Cal. 466, 58 Am. Rep. 466.) If the demand be in truth barred, but the facts do not appear on the face of the complaint, the defense must be made in the answer. (Smith v. Richmond, 19 Cal. 477; Mason v. Cronise, 20 Cal. 217; Cameron v. San Francisco, 68 Cal. 390, 9 Pac. 430; Manning v. Dallas, 73 Cal. 420, 15 Pac. 34.) As to the manner of pleading the statute of limitations, see Revised Statutes of Idaho, section 4213.

Opinion:
HUSTON, J.
This is an appeal from a judgment of the district court for Bannock county. The facts are substantially as follows, as shown by the record: In August, 1891, the defendant was, and for some time previous to that date, had been, a corporation organized under the laws of Idaho, and doing business in this state. Being in need of money to carry on the business in which they were engaged, and not being able to procure the same upon the credit of the corporation, at a stockholder meeting, held on the fifth day of August, 1891, the following record was made: "Meeting called to devise means to raise money to satisfy a judgment rendered in district court against the Artesian Well and .Drilling Company in favor of the Carlisle Manufacturing Company df Carlisle, Pennsylvania. It was moved and seconded that a note payable at the First Na tional Bank be made to satisfy said judgment, and tbat a mortgage be executed to protect the signers of said note, covering the entire, plant 'of the concern. Carried." It is contended that this action of what was said to be a stockholders' meeting was void, it not having .been held in conformity with law or the charter or by-laws of the companjL Nevertheless, in pursuance of the same, it being ascertained that no money could be procured upon the credit of the company, the plaintiff and three others, members and stockholders in the company, procured from the First National Bank of Pocatello the sum of $1,700, giving their personal note therefor, and which said sum of $1,700 was by them paid into the treasury of said company for the purpose of meeting the exigency aforesaid; said company at the same time executing and delivering to said parties, to secure to them the payment of said sum of $1,700, the note and mortgage heretofore mentioned. When the note given to the bank by the plaintiff and his comakers became due, its payment was extended; another note, being signed by four additional parties, was given. In the meantime the amount of the first note given "had been reduced to about $1,300 by payments made by*the defendant corporation, and for this latter amount the note of the four original makers and four additional'parties was given. In the language of plaintiff (testifying) : "When that note became due, we ail split up, and gave an individual note, except West, and he gave his note, and we signed with him." The transaction last mentioned occurred on April 10, 1894, and the notes so given have been paid by the parties who gave them. This action is brought by plaintiff to recover from the defendant corporation the amount of money so paid by him, alleged in his complaint to be some $868. The cause was tried before the court without a jury, and judgment rendered for plaintiff, from which defendant takes this appeal.
It is claimed by appellant that the findings and judgment of the court are not supported by the evidence, because: First. The plaintiff and three other persons made their note to the First National Bank of Pocatello for a certain sum of money, which they procured and loaned to the defendant corporation. That there was no privity or contractual relation between the plaintiff and bis comakers of the first note, and the defendant. We cannot accept this contention. The record shows conclusively — in*, fact, there is no disagreement between parties as tó the facts— that the corporation defendant required a certain sum of money-to protect them from a sale of their property upon execution.. Not being able to raise the money upon the credit of the corporation, they say to the plaintiff and his comakers of the first, note, "You raise the money for us, and we will secure you by a note and chattel mortgage upon the property of the company."" The money being raised and paid over to and accepted by the-defendant, the defendant executes its note and mortgage to the? makers of the note to secure them (as stated in the resolution; of the stockholders' meeting) against the payment of the note? to the bank. That this was the understanding of all parties-, is shown by the fact that the defendant corporation paid several hundred dollars to the bank upon the note before it became due*. With these facts admitted, how can it for a moment be contended that there was no privity or contractual relation existing; between the makers of the note and the defendant ? The plaintiff's right of action accrued upon the payment by him of his-. note, given for the benefit and behoof of the defendant corporation, and he was not required to resort to an attempted enforcement of the mortgage of doubtful validity. The complaint, stated a good cause of action under our statutes. As the causa of action did not accrue until April, 1894, the statute of limitations could not avail the defendant, even had it been interposed* which it was not. The statute of limitations is a personal privilege, and must, to be made available, be pleaded directly. It cannot be interposed by argument or inference. The complaint is entirely sufficient. It states a cause of action which is fully-made out by the proofs. The judgment of the district court is affirmed, with costs.
Morgan, C. J., and Sullivan, J., concur.