Young v. Bierschenk

• Decision Date: 20 January 1925
• Citation: 201 N.W. 591,199 Iowa 309
• Parties: ELLA YOUNG, Appellee, v. JACOB BIERSCHENK et al., Appellants; LIVING SPRINGS LAND COMPANY et al., Appellees
• Court: Iowa Supreme Court

201 N.W. 591

199 Iowa 309

ELLA YOUNG, Appellee, v. JACOB BIERSCHENK et al., Appellants;

LIVING SPRINGS LAND COMPANY et al., Appellees

Supreme Court of Iowa, Des Moines

January 20, 1925

Appeal from Benton District Court.--JAMES W. WILLETT, Judge.

SUIT on promissory notes given by a corporation. Recovery is sought against individual defendants on a contract which it is claimed created a liability to the plaintiff. The trial court directed a verdict in behalf of the plaintiff, and two of the individual defendants appeal.

Reversed.

Kirkland & White, for appellant Bierschenk.

Hugh Mossman and Pickett, Swisher & Farwell, for appellant Ball.

Tobin Tobin & Tobin and Nichols, Nichols & St. Clair, for appellee Young.

FAVILLE C. J. EVANS, ARTHUR, and ALBERT, JJ., concur.

OPINION

FAVILLE, C. J.

I.

The Living Springs Land Company was a corporation organized under the laws of this state, and engaged in the purchase and sale of real estate. The individual defendants are the officers and directors of said corporation. In 1916, appellee loaned to the said corporation the sum of $ 8,000, for which she took the note of said corporation, indorsed by certain individual stockholders. In 1917, she loaned said corporation the further sum of $ 1,000, and took a similar note therefor. No defense is interposed in behalf of the corporation. The sole question presented by this appeal is whether the individual appellants, Bierschenk and Ball, are liable for the amount due on said notes to appellee. Said appellants did not sign said notes, either as maker, surety, or indorser. Appellee's contention is that appellants are liable for the amount due on the notes, because of a contract entered into between appellants and other stockholders in said corporation. Appellee was not a party to said contract.

It appears from the record that, in the year 1918, the corporation became financially involved, and a meeting of the stockholders and directors was held in March, 1919. At that time, the corporation was owing a large amount of money, and certain of its notes had been indorsed by different stockholders of the corporation. The notes of appellee were so indorsed by three of said stockholders, not including appellants herein; while each of appellants had indorsed other obligations of the corporation. It appears that, at the meeting referred to, a statement of the debts of the corporation was made out on a slip of paper, showing an aggregate of nearly $ 39,000 of indebtedness; and said statement showed that the assets of the company at that time aggregated about $ 31,000. It appears that the indebtedness of the corporation to appellee was listed among the liabilities that were so shown at that time. At this meeting, the various stockholders discussed the question of making provision for the payment of the debts of the corporation, but no definite plan was then agreed upon. Thereafter, the appellant Bierschenk consulted an attorney in regard to the indebtedness of the corporation on which he was liable as indorser or surety. An arrangement was entered into, by which one of the stockholders, one Lorenz, agreed in writing to pay $ 18,850 of the indebtedness of the corporation; and certain other stipulations were entered into, respecting the adjustment of some of the outstanding indebtedness between the stockholders of the corporation and Lorenz, he assuming and agreeing to pay certain notes of the corporation upon which appellant Bierschenk was the sole indorser. This relieved Bierschenk of a portion of his liability.

About April 1, 1919, another meeting of the stockholders of the corporation was held, at which the indebtedness of the corporation was again discussed. It was apparent that the liability of the individual stockholders for the debts of the corporation which they had assumed was not equal in amount. As a result of this meeting and conference, the parties entered into a written contract, which is as follows:

"Vinton, Iowa. April 1, 1919. It is hereby agreed among the undersigned, who are the equitable owners of all of the assets of the Living Springs Land Company and who in different amounts are liable for the debts of the Living Springs Land Company, as is evidenced by certain promissory notes that are in different banks of Vinton and held by different individuals as follows:

"First. It is agreed that all of the equities and assets of the said Living Springs Land Company shall be converted into cash at the earliest opportunity for the fair market value thereof and all of the returns therefrom applied and used in paying the debts of the company and of the individuals, who signed notes for the company.

"Second. Whenever it is determined what the balance of the liabilities are, it is agreed that each of the undersigned shall pay an equal share with each other in the payment of said liabilities.

"Third. In the event it becomes necessary to raise some money for the purpose of protecting the Minnesota farm or to pay taxes or interest, so as to save the equities in these properties, they agree to furnish their equal share of said money.

"Fourth. It is agreed upon the part of William Miller, who signs this contract, that he will forthwith use his energy and his experience as a real estate salesman to sell these properties making up the assets of the corporation to the end that all of the returns therefrom be used at as early a day as possible for the paying off or the cutting down of the liabilities of the corporation. He shall receive no compensation whatever for his services, but when he is at expense for the Living Springs Land Company alone in the way of railroad or hotel expenses, it shall be paid out of the proceeds from the property, all items of settlement hereunder to be made at Vinton, Iowa.

"Fifth. It is agreed that Albert Houlihan and Will Gilchrist shall act as trustees for the undersigned and money shall be paid to them and accounting made by them to the undersigned, so that the rights of all of the parties are equal when the business is done, said trustees like the agent to act without compensation.

"This contract is not binding until each and all of the following persons sign the same, to wit: William Miller, Charles Elliott, Jacob Bierschenk, J. H. Ball, W. D. Leverich, A. C. Houlihan and R. H. Allen."

Thereafter, the stockholders proceeded to act under said contract. The property of the corporation was disposed of, and the proceeds therefrom used in the payment of various debts of the corporation. Appellee seeks to recover from appellants on the theory that the contract was made for her benefit, and that appellants, by executing the same, became personally liable to her for the amount of the indebtedness of the said corporation to her on the said promissory notes.

It is the rule in this state that a contract between two persons, executed for the benefit of a third person, based upon sufficient consideration, may be enforced by the third person for whose benefit it was made. We do not, however, pass upon the question as to whether or not the contract in question was made for the benefit of appellee, or if so made, whether appellee's remedy is at law or in equity. A ruling as to that question is expressly reserved. We merely assume that she might have such right, in this action, for the purpose of a discussion of other questions involved in the case.

Appellee contends that the contract was an obligation on the part of the signers thereto, by which they bound themselves, jointly and severally, to pay the indebtedness of the corporation including the indebtedness of appellee, and that, under said contract, appellee has the right to recover the amount of the said indebtedness from the individual signers...