Court Opinion

ID: 7101549
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:16:19.647275+00
Date Added: 2024-06-11T16:13:25.539121
License: Public Domain

ON REHEARING.
Reed, J.
2. statute of cmintybonds vRes^or rail-action to recover money paid on. Rehearings were granted in these causes on the petitions of the plaintiffs, and they have been elaborately reargued bjr counsel. A majority of the court are still of the opinion that the judgments of the circuit court ought to be affirmed, but are not altogether agreed as to the grounds upon which ° . . ° ° ,, the decision should be made. I am not fully convinced of the correctness of the view expressed in the original opinion of the majority, that the location and construction by defendant of its railroad through the counties by way of Eairfield and Ottumwa constitutes a consideration for the bonds, and I prefer to place my adherence to the order of affirmance on another ground, which to my mind is entirely satisfactory. I am willing to concede that the plaintiffs at one time had causes of action against the defendant, growing out of the transactions in question; but I am convinced that their rights of action thereon are now barred by the statute of limitations. To make apparent the correctness of this view, it is only neccessary, I think, to point out the *399real ground of defendant’s liability under the transaction. It is alleged in the petition in each case that the county issued the bonds for the accommodation of the defendant, and it was contended by counsel in argument that, as the counties had no legal capacity to enter into the contracts under which they issued them, and they were received by defendant without consideration, it became bound to protect the counties against liability thereon, or to reimbuse them for any amounts which they might be compelled to pay in satisfaction of said bonds.
It is shown by the evidence that the plaintiffs have paid large portions of the money, which they have been- compelled to pay in satisfaction of the bonds and the interest thereon, within the five years preceding the institution of the suits, and it is very clear that the causes of action for those amounts would be still subsisting if the bonds were mere accommodation paper, or defendant’s liability under the transaction arose out of its failure to perform an undertaking on its part to indemnify the plaintiffs against their liability on the bonds, or to reimburse them for the amounts they might be compelled to pay in satisfaction of them. But that is not the ground of defendants’ liability. A definition of an accommodation note or bill is given in the original opinion of the majority, the correctness of which is not questioned. The contract between the parties to such a transaction is that the one receiving the accommodation will negotiate the paper which is executed without consideration, and will apply the proceeds to his own use; and that he will either pay it at its maturity, or reimburse the maker in case he is compelled to pay it. The liability of the parity in that case grows out of the contract. A cause of action accrues in favor of the maker of the accommodation paper, only upon the failure of the other party to the contract to perform his undertaking. But that was not the character of the transaction between these parties. Each of the counties contracted with defendant for the purchase of stock in the corporation to the amount of $100,000, and agreed to pay for the same with its *400own bonds for that amount. The parties to each of theso contracts supposed the counties had the power to enter into the agreements. The bonds in question were subsequently delivered in that belief, and as part payment for the stock. There was no expectation or agreement that defendant would either pay them at maturity, or reimburse the counties iix case they were compelled to pay them; but the real agreement and expectation of the parties when the counties issued the bonds were directly to the opposite of this. The counties expressly agreed that they would pay the bonds, at their maturity, to defendant, or whoever then might be the holders of them, and defendant received them without any agreement to indemnify the counties against them, or reimburse them for what they might be coinjielled to pay in satisfaction of them. The bonds, then, were clearly not accommodation paper, and the transaction in which they were issued did not have the effect to create obligations of the character of those which arise between the parties when one person executes and delivers his promissory note for the mere accommodation of another.
But the real ground of defendant’s liability is this: The counties did not have legal capacity to become stockholders in a railroad coloration. The subscription to the capital stock of defendant was a contract which they had no power to make. It therefore did not constitute a consideration for the delivery of the bonds; and, as defendant received the bonds without consideration, and the contracts were executory, and were invalid solely because of the incapacity of the counties to enter into them, it was under obligation to return them, or compensate the counties for them. The general rule in this respect is well settled by the authorities. It is stated with admirable precision by the supreme court of Wisconsin, in Northwestern Union Packet Co. v. Shaw, 37 Wis., 656, in the following language: “When money has been paid upon an executory agreement which is free from moral turpitude, and is not prohibited by positive law, but which is invalid by reason of the legal incapacity of a party *401thereto, otherwise capable of contracting, to enter into that particular agreement, the money so paid may, while the agreement remains executory, be recovered back by the party paying it in an action for money had and received.”
The obligation of the party who has received the money or property to return the same, arises out of the fact that he has received it without consideration upon an invalid contract, and it arises upon the instant of its delivery to him. The right of action of the party paying the money, for its recovery, accrues at once upon its payment, and it is not dependent on the happening of any future event. The agreement between defendant and the counties was that the latter should pay their stock subscriptions in bonds, and the bonds in question were delivered under this agreement; that is, they were delivered by the counties and accepted by the defendant in payment of the subscription. By the delivery and acceptance of the bonds, the parties were placed in the same position which they would have occupied if the payments had been made in money instead of bonds. The same rights and obligations accrued by virture of the transaction which would have arisen if the counties had each made a payment of $30,000 in money on its subscription. The law at once imposed upon defendant the obligation to return to each of the counties the value of the bonds received from it under the contract, and a right of action instantly accrued in favor of the county for the recovery of that value. Under our statute of limitations, (Code, § 2529, subd. 4) an action might have been brought for the enforcement of this right at any time within five years from the time the cause of action accrued, but not afterwards. These actions were not brought within that time.
Affirmed. ,
Eothrook and Seevers, J J., concur in the foregoing opinion, but desire to say that they 'maintain that the original *402opinion is correct, in holding that the plaintiffs have no cause of action upon which they in any event could recover.