First Carolinas Joint Stock Land Bank of Columbia v. Courtway

BhogdeN, J. Does a resolution, passed by the board of directors of a corporation, indemnifying the maker of a promissory note which is secured by deed of trust, against loss claim or demand by reason of the execution of the note, impose personal liability upon said directors to the payee of said note? The plaintiff seeks to recover from the directors upon three major theories, to wit : (a) The statute of frauds does not apply to the transaction; (b) the plaintiff, Land Bank, is the contemplated beneficiary of the indemnity agreement; (c) plaintiff is entitled to recover by reason of the application of the principle of subrogation. The first theory is overthrown by the decision of this Court in Asbury v. Mauney, 173 N. C., 454. It was expressly held that the minutes of a corporate meeting are not ordinarily sufficient memorandum in writing to satisfy the requirements of the statute of fraud. The Court said: “The defendant did not sign the minutes and the plaintiff must, therefore, show, in order to maintain his position, that he himself when signing the minutes as secretary of the corporation was signing' as the duly authorized agent of the defendant. The first objection to this position is that the plaintiff did not purport to sign the minutes as agent for the defendant, but as secretary of the corporation, and, again, it seems to be well settled that one of the contracting parties cannot be the agent of the other for the purpose of binding him by his signature under the statute of frauds.” The second theory rests upon a line of decisions beginning with Gorrell v. Water Co., 124 N. C., 328, and running through Federal *527 Land Bank v. Atlas Assurance Co., 188 N. C., 747, and Schofield's Sons v. Bacon, 191 N. C., 253. Summarizing tbe law in tbis line of decisions in Bank v. Assurance Co., 188 N. C., 747, it was written: “Numerous decisions have established the principle, in this jurisdiction at least, that ordinarily the beneficiaries of an indemnity contract may maintain an action on said contract, though not named therein, when it appears by express stipulation, or by fair and reasonable intendment, that their rights and interests were in the contemplation of the parties and were being provided for at the time of the making of the contract.” In the case at bar it appears by express stipulation that the indemnity was designed for the exclusive benefit of Courtway. This conclusion is reinforced not only by the language of the resolution itself, but by the practical construction placed upon the instrument by the parties, in correspondence, prior to the execution of the deed of trust. The practical construction of a written instrument by the parties prior to a controversy always challenges serious consideration. Cole et al. v. Fibre Co., ante, 484. Indeed,- the “beneficiary doctrine” does not apply 'to bonds of strict indemnity where the indemnity by either express terms or reasonable intendment runs' solely to the benefit of the obligee. McCausland v. Construction Co., 172 N. C., 708. Nor can plaintiff recover upon the theory of subrogation. If the resolution of the directors fails to satisfy the statute of frauds so far as the plaintiff is concerned, then conventional subrogation could not grow out of a contract that never existed. In other words, the plaintiff, if entitled to recover at all, must recover upon some phase of the resolution adopted by the directors of Marlboro Peach Orchards. If that resolution, so far as the plaintiff is concerned, falls within the inhibition of the statute of frauds, then all right to recover against the individual directors fails. Thus, it becomes immaterial whether Rarber was a director or not, or whether the estate of Thomas was fully administered before notice of claim. No error.