Court Opinion

ID: 5437025
Source: CourtListenerOpinion
Date Created: 2022-01-08 17:55:53.450032+00
Date Added: 2024-06-11T08:31:52.644656
License: Public Domain

Cboceett, J., also filed the following dissenting opinion:
After the findings were filed in this case, the defendant, on notice to the plaintiff, moved the Court to set them aside *536and to substitute a series of findings submitted by the defendant. The motion was granted, and the plaintiff excepted. It is well settled in this Court that where the findings are contrary to or unsupported by the evidence, the only proper proceeding to correct them is a motion for a new trial, and not an exception to the findings. (Hidden v. Jordan 28 Cal. 304; Miller v. Steen, 30 Cal. 408; Cowing v. Rogers, 34 Cal. 648; Rice v. Inskeep, Id. 224.) Nevertheless, if the Court, through inadvertence or a misconception of the testimony, finds contrary to the evidence, I can perceive no valid reason why it may not, at any time during the term and before the entry of judgment, receive the suggestions of counsel as to the alleged errors, and correct them on its own motion; and if either party is not satisfied with the findings as corrected, the remedy is by motion for a new trial. In this fiiethbd, errors proceeding from inadvertence or an evident misapprehension of the testimony, may be corrected without prejudice to the right of either party to move'for a new trial, the necessity for which may in this way frequently be obviated. It is but due to the Court and to the speedy administration of justice, without unnecessary circuity, that the Court should have the opportunity thus promptly to correct its own errors, so that its final action may be the result of its deliberate correction, and not of mere inadvertence and misapprehension.
In this case, there is no substantial difference between the two series of findings on any material point, and it is not perceived that the plaintiff has been prejudiced by the action of the Court in this respect.
The releases from McClelland and Atkinson to the defendant, were evidently intended by the parties as-a release’ only of his individual liability as a stockholder for the debts due from the corporation to these creditors. Théy purport on their face, only to release him from “his proportion” of the company’s indebtedness to them, and these instruments cannot be construed as a transfer to the defendant of the indebtedness of the corporation to McClelland and Atkinson.
But the important question in the case is, whether the releases from McClelland and Atkinson to the defendant, of *537liis proportion of tho debt due from the corporation to them, operated in law to discharge the corporation, pro tanto, from its indebtedness. If such was the legal effect of the releases, the defendant claims that to that extent he has cancelled tho indebtedness of the corporation to two of its creditors, and is entitled, under Section 16 of the Act under -which tho corporation was organized, to have that sum deducted from the amount for which he would otherwise have been liable as a stockholder, to other creditors. The question is one of great practical importance, not only to stockholders in corporations, but to the creditors. It should be speedily and definitely settled whether, if a creditor of a .corporation release one of the stockholders from his individual liability for tho debt, he thereby discharges the corporation and the other stockholders.
In general, the release under seal of one joint, or joint and several debtors, will discharge the whole. (Armstrong v. Hayward, 6 Cal. 185; Rowley v. Stoddard, 7 John. 210; Cheatham v. Ward, 1 Bos. & Pul. 633; American Bank v. Doolittle, 14 Pick. 126; Tuckerman v. Newhall, 17 Mass. 583; Goodnow v. Smith, 18 Pick. 415.)
The release extinguishes the debt. (McCrea v. Purmort, 16 Wend. 474.) The reason assigned for the rule is, that as between joint debtors, there is a liability for contribution; and if either pays the debt, he is entitled to demand from his co-obligor his just proportion of it, and this right of contribution would be defeated by the release. Hence it is held that if a creditor release one of the joint obligors ho releases the whole, and extinguishes the obligation. But this principle has no application to the release of sureties or guarantors. The holder of a promissory note may release tho endorser or guarantor without impairing the obligations of the maker. Ho may maintain a joint or several action against them, and if he releases the maker he releases the sureties; because the corpus of the obligation is extinguished, and the debt being cancelled, the sureties are of course discharged. But the release of the surety does not discharge the principal, for the reason that, as between themselves, it *538is the debt or obligation of the principal; and the surety is not liable to reimburse the principal. The release of the surety, therefore, can in no event prejudice the principal, whose obligation continues, notwithstanding the release. The immediate question for our solution is, to what extent these principles affect the -relations between a corporation, its stockholders and creditors. That a release to a corporation discharges the stockholders, there can be no doubt, whether the corporation and the stockholders be treated as joint, or joint and several debtors, or, as between themselves, the corporation as the principal debtor, and the stockholders as sureties. Whilst both are primarily liable to creditors, and may be held jointly and severally for the debt, in the same manner that the maker and endorser of a promissory note may be made responsible to the creditor in one or separate actions, nevertheless, as betiueen themselves, the corporation is the principal and the stockholder only the surety. If the stockholder, out of his private estate, be compelled to pay a debt of the corporation, there can be no doubt that he can resort to the property of the corporation for his indemnity. As between the corporation and its stockholders, the corporate property is the fund primarily liable for the corporate debts; and if a stockholder pays the debt, he can hold the corporate property for it. If it were otherwise, and a corporation, owning a large amount of property, should become insolvent, its debts might be collected from the stockholders, who would be without a remedy against the corporate property, which is the fund especially set apart by the corporators to meet the corporate liabilities. This would be a perversion of the theory on which corporations are founded, and would transpose the true relation between the stockholders and the corporation. In the case supposed, it would result in exonerating the corporate property from its just burdens, at the expense of the stockholders, who could not reach the property except by the tardy and expensive process of winding up the corporation.
I conclude, therefore, that as between themselves, the corporation is the principal debtor, and the stockholders are but sureties or guarantors; and though both are primarily *539liable to creditors, in the same manner that the maker and endorser of a promissory note are primarily liable, yet, as between themselves, the corporation being the principal debtor and the stockholders only its sureties, a release of the corporation will release the stockholders; but a release of the latter will not discharge the former, for precisely the same reason that a release of the endorser does not discharge the maker of a promissory note. If the corporation pays the debt out of the corporate property, it cannot call upon the stockholders for contribution; but if a stockholder pays the debt, he can demand more than contribution from the corporation, and can resort to the corporate property for a full indemnity.
It results from this view of the law, that a release to a stockholder of his individual liability for his proportion of a debt due to a particular creditor does nót pro tanto discharge the corporation, and hence, the release from McClelland and Atkinson to the defendant, in my opinion, did not extinguish any portion of the indebtedness of the corporation ; and, therefore, the defendant was not entitled to any deduction from the amount-due from him to the plaintiff. The releases were not relevant or competent evidence, as they proved nothing material to the defense. I express no opinion on the point whether a release of one or more stockholders from their individual liability, releases pro tanto the other stockholders from their liability, as such. But, for the reasons above stated, I dissent from the opinion of a majority of the Court.