In re Romadka Bros. Co.

• Decision Date: 29 May 1914
• Docket Number: 2046.
• Citation: 216 F. 113
• Parties: In re ROMADKA BROS. CO. v. ROMADKA. FIRST SAVINGS & TRUST CO.
• Court: U.S. Court of Appeals — Seventh Circuit

216 F. 113

In re ROMADKA BROS. CO.

FIRST SAVINGS & TRUST CO. v. ROMADKA.

No. 2046.

United States Court of Appeals, Seventh Circuit.

May 29, 1914

The bankrupt is a corporation, incorporated under the laws of Wisconsin for manufacturing and other purposes specified in the articles, and the trustee in bankruptcy appeals from an order of the District Court, which reverses an order of the referee therein and directs allowance against the estate in bankruptcy of the appellee's claim in suit. The opinion of Judge Geiger upon which the order rests, together with his recital of facts deemed material, is certified in the transcript of record, and appears as well reported under the title In re Romadka Bros. Co. (D.C.) 206 F. 944.

Miller Mack & Fairchild, of Milwaukee, Wis. (Samuel T. Swansen, of Madison, Wis., and James B. Blake, of Milwaukee, Wis., of counsel), for appellant. John M. W. Pratt, of Milwaukee, Wis. (Cary, Upham & Black, of Milwaukee, Wis., of counsel), for appellee.

Before BAKER, SEAMAN, and MACK, Circuit Judges.

SEAMAN Circuit Judge.

The claim in suit is a promissory note for $30,000, dated March 17, 1909, made by five individual signers and payable to the decedent, Charles P. Romadka, bearing an indorsement thereon as follows: 'For value received, we hereby guarantee the payment of the within note at maturity, and interest thereon at its respective maturity'-- signed in the name of the bankrupt corporation, by its president and secretary. Both of the officers so executing the guaranty are individual makers on the face of the note and all the makers are stockholders of the guarantor corporation and owners of all its capital stock. Thus the prima facie import of the contract is an obligation of the joint and several makers of the note for their individual indebtedness, and an undertaking on behalf of the corporation to guarantee payment thereof.

In this aspect of the claim, the corporation appears as an accommodation guarantor of the indebtedness of the makers and the doctrine is well settled that a corporation cannot ordinarily become bound for such purpose, so that its naked promise as surety or guarantor (with or without independent consideration) could not be enforced. 3 Cook on Corporations (6th Ed.) Sec. 774; 4 Thompson, Com. on Corporations, Sec 5739; 10 Cyc. 1115. This doctrine is a mere exemplification of the established general rule that the contractual powers of a corporation are limited to objects authorized (either expressly or by implication) in its incorporation. It is upheld in Wisconsin (Madison, W. & M. Plank Road Co. v. Watertown & P. Plank Road Co., 7 Wis. 59; Kennan v. Rundle, 81 Wis. 212, 51 N.W. 426) and by this court, in effect, in the case entitled In re Haas Co., 131 F. 232, 234, 65 C.C.A. 218.

We do not understand the above stated general doctrine to be controverted or questioned in the opinion of the trial court directing allowance of the claim, nor in the argument on behalf of the appellee in support of such allowance, but that the ruling in favor of the claim is predicated on other propositions which are assumed to render that doctrine either inapplicable or inoperative. Those propositions are: First (as stated in substance in the opinion filed), that the evidence proves the transaction out of which the note arose to be in truth and purpose an assumption by the corporation of the indebtedness of the several makers (stockholders), for the benefit and purposes of the corporation, and thus within its powers. Second (as further contended in the argument of counsel), that the evidence establishes the contract on the part of the corporation, treated as one of guaranty: (1) To be made for corporate purposes within its powers; and (2) in either view of the contract creates an estoppel against the defense of ultra vires.

1. The contention that the arrangement was not one of accommodation guaranty of payment, but was intended by all the parties and amounted to an assumption by the corporation of 'the personal debt' of the stockholders to the payee, is discussed and upheld in the opinion of the trial court for the allowance. The opinion is prefaced with a summary of circumstances in evidence which either preceded or attended the execution of the note in suit, whereon the ruling must rest, and such statement (as reported 206 F. 944) may be referred to without repetition as an entirety in the present opinion. On examination thereof, however, and as well of the testimony preserved in the record, we believe no sanction appears for the above-mentioned inference therefrom (either of law or of fact) of a novation agreement, or assumption on the part of the corporation of the indebtedness represented by the note, irrespective of the question of want of corporate power to that end reviewed by this court in ...