Bowser v. Baumeyer

The plaintiffs in error were plaintiffs below, and brought an action to recover from the defendants on a contract not in writing. Their second amended petition was met by demurrer, based on the grounds that it did not state facts sufficient to constitute a cause of action, and that the contract was within the statute of frauds. On the consideration of the trial court, the demurrer was sustained, and, plaintiffs not desiring to plead further, a final judgment was rendered dismissing the action.

We learn from the averments of the second amended petition that the plaintiffs, on and prior to June 30, 1920, were directors of the North Fairfield Elevator Company, a corporation, and that the defendants were engaged as partners under the name of Baumeyer Bros., and were the owners of two shares of stock in the above corporation of the par value of $100 each. The pleading avers that about the date named it became necessary for the corporation to secure a loan of $15,000, and that, in order to secure the amount, it was necessary for these plaintiffs to pledge their personal credit. They aver that about the date named they entered, as directors, into a verbal agreement with the defendants, and certain other stockholders of the elevator company, by which, in consideration of the agreement of the defendants and other stockholders to stand back of the plaintiffs, each of the plaintiffs gave his personal notes to the North Fairfield Savings Bank Company in the sum of $1,800.

The second amended petition then avers:

"That said defendants and each one of the other stockholders above referred to agreed that, if these plaintiffs should suffer any loss by reason of so signing the notes aforesaid, said defendants would, to the extent of an amount equal to the par value of the stock held by said defendants, indemnify plaintiffs against such loss."

It appears from the averments of the pleading, that, upon securing said agreement with the defendants and other stockholders, the plaintiffs executed their promissory notes to the bank and turned the proceeds over to the North Fairfield Elevator Company. The elevator company became insolvent, its affairs were liquidated through the court, the amount remaining was insufficient to pay its debts, and plaintiffs have been compelled to pay the notes which they executed to the bank, and they aver that, in addition to paying their own shares under the agreement, they have each paid the sum of $986.92 upon the notes, together with interest, and they ask judgment against the defendants in the sum of $200, being the amount of defendant's stock.

The verbal promise by the defendants as pleaded was to indemnify the plaintiffs against whatever loss they would suffer by reason of signing the promissory notes to the bank, the liability of the defendants being limited to the amount of stock held by them. This promise would be within the inhibition of the statute of frauds, as it was a promise to answer for the debt, default, or miscarriage of another, and, being oral, no action would lie thereon. The case is controlled by the following Ohio authorities: Easter v. White, 12 Ohio St. 219; Kelsey v. Hibbs,13 Ohio St. 340; Ferrell v. Maxwell, 28 Ohio St. 383, 22 Am.Rep., 393.

A case directly in point, cited by counsel, is Goldie-KlenertDistributing Co. v. Bothwell, 67 Wn. 264, 121 P. 60, Ann. Cas., 1913D, 849. This case was decided by the Supreme Court of the state of Washington and holds that the statute of frauds applies to a collateral oral promise by a stockholder to pay for goods to be delivered to the corporation.

The trial court was correct in sustaining the demurrer to the second amended petition and the judgment will be affirmed.

Judgment affirmed.

WILLIAMS and LLOYD, JJ., concur.