Court Opinion

ID: 3307809
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:22:01.840621+00
Date Added: 2024-06-11T12:34:31.850306
License: Public Domain

I dissent. From whatever standpoint we view the transaction, it seems to me the liability impressed upon the defendant as a stockholder of the Palo Alto Investment Company was created when that corporation in its contract with the Morris Real Estate Company agreed to pay the latter's indebtedness to plaintiff's assignor, the Crocker National Bank.
That obligation was the foundation of defendant's liability. It was the only consideration for the note subsequently given by the corporation and sued on in this action. Whether the note was an extension or a renewal of the original liability, it, in neither case under the established rule in this state, could stay the statute of limitations as to the defendant.
I do not think it is at all clear that an acceptance was necessary by the plaintiff here before a complete accrual of a cause of action in its favor upon the obligation assumed by the Palo Alto Company.
Section 1559 of the Civil Code declares that such a contract may be enforced by the third party "at any time." Notice of acceptance is not required. He may sue precisely as upon a direct contract in his favor. Our decisions, so far as they go, seem to recognize such a contract as in itself establishing the cause of action. As said in Wasker v. Independent M.  D. Co.,142 Cal. 702, 709, [76 P. 654], the action "does not rest upon the ground of any actual or supposed relationship between the parties, as some of the earlier cases seem to indicate, but upon the broad and more satisfactory basis that the law operating upon the acts of the parties, creates *Page 630 
the duty, establishes privity, and implies the promise and obligation on which the action is founded."
The case of Tweeddale v. Tweeddale, 116 Wis. 517, [96 Am. St. Rep. 1003, 61 L. R. A. 509, 93 N.W. 440], one of the decisions cited in Mr. Justice Wilbur's opinion, we think is misapprehended therein. While it recognizes authority in the books for the doctrine that the third party does not become possessed of the benefit of the promise until he accepts it, the court, after an elaborate review of the authorities, reaches the following conclusion. "Without further discussion of the matter we adhere to the doctrine that when one person, for a consideration moving to him from another, promises to pay to a third person a sum of money, the law immediately operates upon the acts of the parties, establishing the essential of privity between the promisor and the third person requisite to binding contractual relations between them, resulting in the immediate establishment of a new relation of debtor and creditor, regardless of the relations of the third person to the immediate promisee in the transaction; that the liability is as binding between the promisor and the third person as it would be if the consideration for the promise moved directly to such third person, regardless of whether the latter has any knowledge of the transaction at the time of the occurrence; that the liability being once created by the acts of the immediate parties to the transaction and the operation of the law thereon, neither one nor both of such parties can thereafter change the situation as regards the third person, without his consent."
The suggestion that to apply the bar of the statute of limitations in this case, during a period when the plaintiff probably had no knowledge of his right of action against the defendant, would be unfair and unreasonable, is beside the point. Obviously the statute did run against the original liability from the date of the assumption of the debt. If there had been no new obligation entered into by the Palo Alto Company by making of the note to plaintiff, defendant's liability would clearly have expired, even if plaintiff had never heard of the transaction. If the action is not barred it is because the note created a new and independent indebtedness of the corporation.
Even if notice to and acceptance by the beneficiary of the contract was necessary, it had such notice and made such *Page 631 
acceptance when it received this new note of the Palo Alto Company for the old note of the Morris Company. The old note was surrendered on the making of the new, and the only consideration was the renewal or satisfaction of the old debt, the one by which defendant's statutory liability was originally created. The complaint in this action recognizes the assumption by the Palo Alto Company of the liabilities of the Morris Company as the basis of its claim. There is set forth in the complaint the facts that plaintiff's assignor in the first instance held the obligation of the Morris Company for its indebtedness, that the Palo Alto Company took over the assets of the former, and executed this new note "in renewal" of the Morris Company note. The logical deduction from this state of facts is that the parties met in the execution of the new note upon a mutual recognition of the liability which had been assumed by the Palo Alto Company to pay to the Crocker Bank the old indebtedness of the Morris Company. The new note of the Palo Alto Company to the Crocker Bank was received in recognition and settlement of that liability.
Clearly, the only claim the Crocker Bank had upon the Palo Alto Company was by reason of the latter's assumption of the indebtedness of the Morris Company. Had the bank rested its claim on that liability, it would have had to begin its action within three years after the assumption of the debt. Instead, it consented to take a "renewal" note. This could not be done to the prejudice of the stockholders' rights, to rest on the original liability.
Rehearing denied.
All the Justices concurred, except Sloane, J., who did not vote. *Page 632