
    BOWSER et v. BAUMEYER et.
    Ohio Appeals, 6th Dist., Huron Co.
    No. 240.
    Decided Apr. 26, 1928.
    First Publication of This Opinion.
    Syllabus by Editorial Staff.
    1105. STATUTE OF FRAUDS — 959. Promissory Notes. — 313. Corporations.
    Promise of stockholders to indemnify directors against loss, by reason of signing note for purpose of raising money for corporation, is within statute of frauds, and must be in writing.
    Error to Common Pleas.
    Judgment affirmed.
    Young & Young, Norwalk, for Bowser et.
    G. Ray Craig, Norwalk, for Baumeyer et.
   FULL TEXT.

RICHARDS, J.

The plaintiffs brought an action to recover of the defendants on a contract not in writing. Their second amended petition was met by demurrer based on the ground that it did not state facts sufficient to constitute a cause of action and that the contract was within the statute of frauds. On the consideration of the trial court the demurrer was sustained and plaintiffs not desiring to plead further, a final judgment was rendered dismissing the action.

We learn from the averments of the second amended petition that the plaintiffs on and prior to June 30, 1920, were directors of The North Fairfield Elevator Company, a corporation, and the defendants were engaged as partners under the name of Baumeyer Brothers, and were the owners of two shares of stock in the corporation of the par value of $10(X00 each. The pleading avers that about the date named it became necessary for the corporation to secure a loan of $15,000.00 and that in order to secure the amount it was necessary for these plaintiffs to pledge their personal credit. They aver that about the date named they entered, as directors, into a verbal agreement with the defendants and certain other stockholders of the elevator company by which, in consideration of the agreement of the defendants and other stockholders to stand back of the plaintiffs, the plaintiffs each gave his personal notes to The North Fairfield Savings Bank Company in the sum of $1800.00.

The second amended petition then avers:

“That said .defendants and each one of the other stockholders above referred to agreed that if these plaintiffs should suffer any loss by reason of so signing the notes aforesaid, said defendants would, to the extent of an amount equal to. the par value of the stock held by said defendants, indemnify plaintiffs against such loss.”

It appears from the averments of the pleading that upon securing said agreement with the. defendants and other stockholders, the plaintiffs executed their promissory notes to the bank and turned the proceeds over to The North Fairfield Elevator Company. The elevator company became insolvent and its affairs were liquidated through the court and the amount remaining was insufficient to pay its debts and plaintiffs have been compelled to pay the notes which they executed to the bank and they aver that in addition to paying their own shares under the agreement they have each paid the sum of. $986.92 upon the notes, together with interest, and they ask judgment .against the defendants in the amount of $200.00.

The verbal promise by the defendants as pleaded was to indemnify the plaintiffs against whatever loss they would suffer by reason of signing the promissory notes to the bank, the liability of the defendants being limited to the amount of stock held by them. This promise would be within the inhibition of the statute of frauds, as it was a promise to answer for the debt, default or miscarriage of another and, being oral, no action would lie thereon. The ease is controlled by the following Ohio authorities:

Easter vs. White, 12 Ohio St., 219;

Kelsey vs. Hibbs, 13 Ohio St., 340;

Ferrell vs. Maxwell, 27 Ohio St., 383.

A case directly in point which has been cited by counsel is Goldie-Klenert Distributing Co. vs. Bothwell, 121 Pac., 60. This case was decided by the Supreme Court of the State of Washington and holds that the statute of frauds applies to a collateral oral promise by a stockholder to pay for goods to be delivered to the corporation.

The trial court was correct in sustaining the demurrer to the second amended petition and the judgment will be affirmed.

(Williams and Lloyd, JJ., concur-.)  