Hamilton v. Meiks

• Decision Date: 17 November 1936
• Docket Number: No. 26787.,26787.
• Citation: 210 Ind. 610,4 N.E.2d 536
• Parties: HAMILTON v. MEIKS et al.
• Court: Indiana Supreme Court

210 Ind. 610

4 N.E.2d 536

HAMILTON

v.MEIKS et al.

No. 26787.

Supreme Court of Indiana.

Nov. 17, 1936.

Appeal from Decatur Circuit Court; John W. Craig, Judge.

Action by Emma Hamilton against George H. Meiks and others. Judgment was entered for the defendants, and the plaintiff appealed to the Appellate Court. The cause was transferred to the Supreme Court under Burns' Ann.St.1926, § 1357.

Reversed, with instructions.

Superseding opinion of Appellate Court in 198 N.E. 833.Gavin & Gavin, of Indianapolis, Herbert C. Jones, of Shelbyville, Noel, Hickam,, Boyd & Armstrong, of Indianapolis, and James L. Shannon, of Greensburg, for appellant.

Ed. K. Adams, of Shelbyville, Rollin A. Turner, of Greensburg, Robert C. Porter, of Cincinnati, Ohio, and Wilbur F. Pell, of Shelbyville, for appellees.

FANSLER, Judge.

Appellant began this action seeking a judgment declaring her personal liability, or lack of it, on a guaranty appearing on the back of $170,000 of preferred stock issued in the year 1922 by the J. B. Hamilton Furniture Company, a corporation, to appellees Porters and Hester Porter Fuller. The stock was issued pursuant to a written agreement between the Porters on the one part, and Joseph B. Hamilton, Lucy Hamilton, and appellant on the other part, by which the first parties transferred and assigned to the second parties all of the capital stock of the C. H. Campbell Furniture Company and all of the assets and property of that company, in consideration of which the second parties agreed to procure a reorganization of the company under the name of J. B. Hamilton Furniture Company and to increase the capital stock of the company, and provide for $170,000 of preferred stock to be issued to the second parties and by them assigned and transferred to the first parties. The said preferred stock was to be due and payable at the end of ten years from February 15, 1922, and was to provide for the payment of cumulative dividends at the rate of 7 per cent. per annum, payable semiannually. It was provided in the contract that ‘said certificates of preferred stock to be endorsed by the said Joseph B. Hamilton and Emma Hamilton, personally.’ The contract was carried out, the company reorganized, the stock increased, and the preferred stock referred to was issued to the Hamiltons and by them assigned to the Porters as agreed, and the certificates were indorsed on the back as follows:

‘We, the undersigned, guarantee the payment of this certificate of stock, according to its terms.

‘Dated the 29th day of March, 1922.

‘Joseph B. Hamilton.

‘Emma Hamilton.’

The court concluded as a matter of law that, under this agreement, appellant was liable to pay any amounts which were not paid by the J. B. Hamilton Furniture Company, according to the terms of the contract, and that the Porters and Hester Porter Fuller are creditors of Emma Hamilton to the extent of any unpaid amounts which were due upon the preferred stock.

It is contended by appellant with much earnestness that the liability of the corporation under the preferred stock certificates was only the liability of a corporation to its stockholders; that the guaranty was no broader and imported no greater liability on the part of appellant than the liability of the corporation expressed in the certificate. In other words, that the guarantors merely agreed that if and when funds were available and due from the corporation to the holders of the preferred stock, either for the purpose of paying interest or for redemption, they would be paid by the corporation; that, since the corporation is insolvent and in the hands of a receiver and there are no funds available, there is nothing due from the corporation, and therefore nothing due from appellant under the guaranty. This position cannot be sustained. In the contract it is said that the preferred stock is to be ‘endorsed’ by the Hamiltons, but when the stock was issued the intention and meaning of the parties was interpreted by appellant in the indorsement quoted above, which was actually put upon the stock. This amounts to an unqualified guaranty of the payment of the certificate of stock according to its terms. It could mean nothing else than an agreement that if the corporation did not pay, or if it could not pay, the guarantors would pay. Much evidence was heard, but it would seem that the contract and agreement of the parties clearly and unequivocally discloses the obligation of appellant, and there is no necessity to look further than their written agreement. It is contended that the corporation could not lawfully bind itself to pay, that is, to redeem its preferred stock within ten years; that such an agreement being invalid was not enforceable against the corporation; and that it is not therefore enforceable against appellant. It is not necessary to decide whether or not the corporation had the right to make such an agreement, and whether it is enforceable. The corporation did have the right to redeem its stock at the end of ten years if it had the funds with which to do so, and appellant had the undoubted right to guarantee that it would have the funds and would redeem the stock, and to agree to redeem it and pay if the corporation did not do so, and this without regard to whether the corporation could be compelled to redeem and pay if it failed to voluntarily do so. Even indorsers on ordinary promissory notes are compelled to pay where the principal fails, notwithstanding payment cannot be enforced as against the principal because of exemption laws or insolvency, and notwithstanding the principal has agreed to waive exemption laws, which he may not effectively do because of a public policy which forbids. If the contract of an infant for the payment of money is indorsed and the infant does not pay according to its terms, the indorser will be liable notwithstanding the contract could not be enforced against the infant. And the same rule applied to indorsers or guarantors of the contracts of married women when they were without power to bind themselves by contract. In Davis et al. v. Statts (1873) 43 Ind. 103, 13 Am.Rep. 382, a case in which sureties for a married woman advanced the same contention that appellant advances here, that is, that ‘a surety is not liable further than the principal, and that whatever discharges the principal discharges the surety,’ it was held that the contention could not prevail, and many authorities are cited to sustain the view. The obligation of a surety differs but little from that of a guarantor, and the differences are technical and generally not substantial. It is said in the text of 28 C.J. 909, that, as a general rule, the liability of...