American Surety Co. v. Blake , 45 Idaho 159 ( 1927 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Plaintiff, American Surety Company of New York, appellant, brought this action to recover upon an indemnity agreement executed by defendant J.W. Blake and P.H. Blake, then stockholders, and president and cashier, respectively, of Fidelity State Bank of Orofino, in consideration of plaintiff's execution of a bond for the bank as a state depository. The bank became insolvent upon April 8, 1921, and plaintiff, upon July 2, 1921, paid the state of Idaho $1,291.40, which it seeks to recover.

P.H. Blake having died, a claim was presented against his estate prior to decree of distribution but more than ten months after publication of notice to creditors. This claim was disallowed as not filed in time and barred by C. S., sec. 7581. The defendant made two defenses: First, that the indemnity agreement was not in effect when the insolvency occurred; and, second, as to the estate, the bar of the statute of limitations.

The court found that the indemnity agreement was not in effect, and that the plaintiff, a foreign corporation, having designated an agent in Idaho for service of process, and otherwise complied with the constitution and laws of Idaho as a foreign corporation doing business in Idaho, was not entitled to be considered as "being out of the state" within the purview of C. S., sec. 7581, and thus file its claim more than ten months after notice to creditors.

Plaintiff was stipulated to be a foreign corporation lawfully doing business in this state. Under sec. 10, art. 11, of the constitution, it was prohibited from so doing business without having "an authorized agent or agents in the same, upon whom process may be served." The same section provides that no corporation formed under the laws of any other state "shall have or be allowed to exercise or enjoy, within this state any greater rights or privileges than those possessed or enjoyed by corporations of the same or similar character created under the laws of this state." C. S., sec. 4773, designed to carry into effect this provision of the constitution, requires such corporation to designate some person "upon whom process issued by authority of or under any law of this state," may be served. C. S., sec. 4778, denies to a noncomplying foreign corporation doing business in the state the benefit of statutes of limitations. C. S., sec. 4779, gives to foreign corporations complying with such requirements "all the rights and privileges of like domestic corporations," and makes them "subject to the laws of the state applicable to like domestic corporations."

A foreign corporation is not compelled to do business in this state, but if it does so within the spirit and intent of the constitutional and statutory provisions it becomes subject to the same laws and statutes of limitations as a domestic corporation (Tropico L. I. Co. v. Lambourn, 170 Cal. 33,148 P. 206; Bank of the United States v. McKenzie, 2 Brock. 393, 2 Fed. Cas. 718, Case No. 927; Stanhilber v. Mutual M. I. Co.,76 Wis. 285, 45 N.W. 221; Fire Assn. of Philadelphia v. NewYork, 119 U.S. 110, 7 Sup. Ct. 108, 30 L. ed. 342; Ex parteSchollenberger, 96 U.S. 369, 24 L. ed. 853; Paul v.Commonwealth of Virginia, 8 Wall. (U.S.) 168, 19 L. ed. 357; 14a C. J., p. 1240, sec. 3945; 8 Thompson on Corporations, 3d ed., sec. 6585), and to permit a foreign corporation to take the advantage that this complying corporation has sought to claim, compliance for all purposes beneficial to it, but to claim to be outside of the state for the purpose of gaining the privilege of a longer period of time than a domestic corporation would have to file a claim against a decedent's estate, would be in violation of sec. 10, art. 11, of the constitution, by per. mitting it to "have or be allowed to exercise or enjoy, within this state . . . . greater rights or privileges than those possessed or enjoyed by corporations of the same or similar character created under the laws of this state," and would, contrary to C. S., sec. 4779, make it not "subject to the laws of the state applicable to like domestic corporations."

Compliance with the constitutional and statutory requirements by a foreign corporation starts the statutes of limitations running in its favor, as well as that in this case running against it. (Lawrence v. Ballou, 50 Cal. 258; Sidway v.Missouri L. L. S. Co., 187 Mo. 649, 86 S.W. 150; Tiller v.St. Louis S. F. R. Co., 189 Fed. 994; McCabe v. IllinoisCent. R. Co., 13 Fed. 827; United States Exp. Co. v. Ware, 20 Wall. (U.S.) 543, 22 L. ed. 422; Fletcher's Cyclopedia of Corporations, sec. 398.) While the statute is in effect a statute of limitations, it is also a rule of law and a rule of property (Pulliam v. Pulliam, 10 Fed. 53; Goodno v. Hotchkiss, 237 Fed. 686 (701), and a foreign corporation complying with the constitution and laws becomes subject to the provisions of the limitation, the same as a resident corporation. The court, therefore, did not err in denying judgment against the estate of P.H. Blake.

The court supported its finding, in effect a conclusion, that the contract was not in effect, by three other findings: (1) That defendants had by a letter terminated their contract of indemnity; (2) that there existed no consideration for the indemnity agreement after defendants had, to the knowledge of plaintiff, ceased to be officers or stockholders of the bank; (3) that plaintiff had, at request of the bank, given to the state notice of cancelation of the bond under C. S., sec. 314, and later withdrew such notice and continued the bond without defendants' consent; that by so doing, it had released defendants.

The defendants contended that, by a letter written by defendant J.W. Blake, as to which he testified and as to which an exhibit was introduced, identified by him as a copy of "a letter sent by me to the American Surety Company at Salt Lake, Utah," they had terminated the indemnity agreement. Appellant contends that the proof was not sufficient to establish the mailing and receipt of this letter. However, when the copy was offered with the foregoing identification, appellant's attorney made no objection as to the sufficiency of the proof of mailing, and specifically stated that he had no objection to its introduction in evidence. Such grounds of objection should have been interposed at the time, and the proof, clothed with the presumption surrounding proof of mailing, must under these circumstances be considered as sufficient proof of its mailing and receipt.

However, the letter stating: ". . . . This letter will be a notice to cancel any and all responsibilities in connection with the said bond, or any other bond in connection of the Fidelity State Bank; since his estate and myself haven't any further interest in the bank," was not sufficient to absolve the indemnitors from any liability already accrued for the repayment of funds, if any, already deposited with the bank.

By the provisions of the agreement of indemnity, the Blakes agreed to furnish to the plaintiff a full and complete cancelation and release of its liability upon the bond as a condition of their release from liability as indemnitors.

The indemnitors could not thus secure the writing of a bond by the plaintiff, and the assumption of a liability, and thus summarily relieve themselves from their obligation by notice that they did not choose to be further bound.

It is true that the notice of the indemnitors to the surety company was sufficient to absolve them from further liability accruing after a reasonable time within which the surety could secure its own release, if it chose, by giving notice of withdrawal under C. S., sec. 314. (Gay v. Ward, 67 Conn. 147,34 A. 1025, 32 L.R.A. 818); Furst v. Buss, 104 Kan. 245,178 P. 411; 31 C. J., p. 429, sec. 23; 2 Black on Rescission and Cancellation, p. 875; Spencer on Suretyship, sec. 103.) There was no proof offered as to the amount of liability, if any, accrued up to the end of such reasonable period after the receipt of this letter purporting to terminate the indemnity agreement, in which the surety could give notice of cancelation of the bond. The indemnity agreement provided that a voucher showing payment by the plaintiff of any amount paid upon the bond should beprima facie evidence of the indemnitors' liability to the surety. Such voucher, introduced in evidence, made a primafacie case of liability on behalf of the defendant Blake for the full amount.

So long as the bank remained a depository, there existed a sufficient consideration to support the indemnity agreement. Their ceasing to be stockholders of the bank did not render without consideration the already executed agreement for indemnity. To relieve themselves from the indemnity agreement, it was incumbent upon the indemnitors to relieve the plaintiff from its liability on the bond already assumed.

The fact that plaintiff demanded of the bank a new indemnity agreement did not release defendants in the absence of such new indemnity, or a release of the bond already executed and any liability of the plaintiff thereon.

The act of the plaintiff in continuing the bond after a notice to the state of cancelation was within its rights under the terms of the indemnity agreement, which covered not only the bond, "but all alterations, renewals, extensions or modifications thereof which may be requested or assented to by the principal."

As to the defendant estate, the judgment is affirmed. As to the defendant J.W. Blake, the judgment is reversed and a new trial ordered. Costs to appellant against the respondent J.W. Blake, and costs to the respondent estate against the appellant.

Wm. E. Lee, C.J., and Givens and T. Bailey Lee, JJ., concur.

(December 8, 1927.) ON PETITION FOR REHEARING.