Payette-Boise Water Users' Ass'n, Ltd. v. Fairchild

• Decision Date: 20 February 1922
• Citation: 35 Idaho 97,205 P. 258
• Parties: PAYETTE-BOISE WATER USERS ASSOCIATION, LTD., a Corporation, Appellant, v. SHERMAN D. FAIRCHILD and GERTRUDE B. FAIRCHILD, Cross-Appellants
• Court: Idaho Supreme Court

205 P. 258

35 Idaho 97

PAYETTE-BOISE WATER USERS ASSOCIATION, LTD., a Corporation, Appellant, v. SHERMAN D. FAIRCHILD and GERTRUDE B. FAIRCHILD, Cross-Appellants

Supreme Court of Idaho

February 20, 1922

AMICABLE SUIT-NO PRESUMPTION OF COLLUSION-SUBSCRIPTION CONTRACT-LIEN FOR ASSESSMENTS - INSTRUMENT GIVEN EFFECT OF MORTGAGE-EXCLUSIVE REMEDY BY FORECLOSURE.

1. Where the record on appeal discloses a real controversy between the parties, and that a decision upon the merits will result in awarding relief which neither party will concede the other, collusion not being established, the fact that the suit may be an amicable one raises no presumption in its disfavor.

2. Where in a subscription contract for shares in a water users' association it is agreed that payments on authorized assessments shall be secured by a lien on the shares and lands of the subscriber, to be enforced by foreclosure and sale as in the case of mortgages, the plaintiff in an action to force collection may not segregate from the contract the simple promise to pay such assessments and sue on the contract for a personal judgment, without foreclosure.

3. Held, that a lien created by virtue of the subscription contract in this case fulfils the requirements of C. S secs. 6355 and 6356, defining mortgages and their manner of creation. Such lien must be deemed in effect a mortgage thereby relegating the plaintiff to an exclusive remedy by foreclosure and sale for collection of the debt.

APPEAL AND CROSS-APPEAL from District Court of the Third Judicial District, for Ada County. Hon. Raymond L. Givens, Judge.

Action for personal judgment on stock subscription contract. Demurrer to complaint sustained and action dismissed. Affirmed.

Judgment of dismissal affirmed. Costs awarded to defendants and cross-appellants.

Eldridge & Morgan, for Appellant.

An action in debt will lie for a personal judgment against the party subscribing for stock, under a contract such as the one in this case. (Beedy v. San Mateo Hotel Co., 27 Cal.App. 653, 150 P. 810; People's Home Savings Bank v Sadler, 1 Cal.App. 189, 81 P. 1029.)

Such contract was a promise to pay, and entirely eliminated the necessity of following the statutory remedy. (Kohler v. Agassiz, 99 Cal. 9, 33 P. 741; Marysville Electric Light & Power Co. v. Johnson, 93 Cal. 538, 27 Am. St. 215, 29 P. 126; Imperial Land & Stock Co. v. Oster, 34 Cal.App. 776, 169 P. 1159.)

"A stockholder in a corporation is bound by the articles of incorporation and the by-laws of the corporation whether he has signed them or not." (McFadden v. Board of Supervisors, 74 Cal. 571, 16 P. 397; Marshall v. Wentz, 28 Cal.App. 540, 153 P. 244; Anglo-American Land, Mortgage & Agency Co. v. Dyer, 181 Mass. 593, 92 Am. St. 437, 64 N.E. 416.)

"A sale or forfeiture of defendant's shares was not a condition precedent to the right to recover this assessment. While a remedy for forfeiture is given by the articles of the association, this remedy is cumulative, and is no bar to an action at law for the debt. This is clearly intended as a concurrent remedy." (Campbell v. American Alkili Co., 125 F. 207, 61 C. C. A. 317; Nashua Savings Bank v. Anglo-American L., M. & A. Co., 189 U.S. 221, 23 S.Ct. 517, 47 L.Ed. 782; 14 C. J. 646; Jonas v. Frost, 32 Idaho 214, 179 P. 949.)

E. G. Davis, for Cross-appellants.

Sec. 17, art. 11, of the constitution relates to and limits the personal liability of a stockholder, but in no way limits the power of the corporation to make assessments upon stock fully paid up and subjecting such stock to sale for the purpose of discharging the obligations of such corporation. (Wall v. Basin Mining Co., Ltd., 16 Idaho 313, 101 P. 733, 22 L. R. A., N. S., 1013; 14 Corpus Juris, 647.)

"The stockholder may waive his constitutional right, and become liable by his own acts or consent." (Ireland v. Palestine etc. Co., 19 Ohio St. 369.)

The provisions of existing law with reference to the making of corporate assessments enter into and become a part of every stock subscription contract unless it is expressly stipulated to the contrary. (Los Angeles Athletic Club v. Spires, 166 Cal. 173, 135 P. 298; Imperial Land & Stock Co. v. Oster, 34 Cal.App. 776, 168 P. 1159; People's Home Sav. Bank v. Sadler, 1 Cal.App. 189, 81 P. 1029.)

Van de Steeg & Breshears, Walter Griffiths and T. A. Walters, Amici Curiae.

This is a suit amicably instituted and conducted, wherein each of the parties litigant desires the same decision and which decision would affect the rights of third parties. It does not present for the decision of this court a bona fide controversy. It is collusive, and not prosecuted in good faith. (Lord v. Veazie, 8 How. (U. S.) 251, 12 L.Ed. 1067; Haley v. Eureka County Bank, 21 Nev. 127, 26 P. 64, 12 L. R. A. 815; Muskogee Gas etc. Co. v. Haskell, 38 Okla. 358, Ann. Cas. 1915A, 190, 132 P. 1098; Gardner v. Goodyear Dental Vulcanite Co., 131 U. S. Appendix, CIII, 21 L.Ed. 141; Van Horn v. Kittitas County, 112 F. 1; Connoly v. Cunningham, 2 Wash. Ter. 242, 5 P. 473.)

LEE, District Judge. Budge, McCarthy, Dunn and Lee, JJ., concur.

OPINION

LEE, District Judge.

--Subsequent to the argument and submission of these appeals, certain parties as friends of the court filed and presented a motion to dismiss, alleging, in substance, that the issues are fictitious and feigned, involving neither a substantial nor bona fide controversy between the parties, but amicably and collusively presented by them for the purpose of securing some decision affecting the rights of strangers to the record.

This contention cannot be sustained. The record discloses a very real controversy between the parties; and a decision upon the merits will award relief which neither party will concede the other. No sufficient showing has been made to establish collusion, and the fact that a suit may be an amicable one raises no presumption in its disfavor.

The plaintiff and appellant, the Payette-Boise Water Users Association, seeks a personal judgment against the respondents and cross-appellants, Sherman D. Fairchild and Gertrude B. Fairchild, husband and wife, by reason of certain heretofore levied assessments, which, it is alleged defendants, after repeated demands, have refused to pay. The complaint charges in part that on or about May 27th, 1910, the defendants executed and delivered to plaintiff their certain stock subscription contract for seventy shares of plaintiff's stock; that it was agreed under the terms of said contract...