Case ID: cal_107/html/0446-01.html
Source: Caselaw Access Project
Author: {"author": "Garoutte, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[No. 19578.
    Department One.
    June 7, 1895.]
    JOSEPH BROWN, Respondent, v. SAMUEL MERRILL et al., Appellants.
    Corporations—Liability of Stockholders—Action by Stockholders.— Stockholders may have the benefit of the statute of this state imposing liability on stockholders for their respective proportions of the debts of the corporation, as against other stockholders in the same corporation.
    Id.—Several Liability of Stockholders.—Stockholders in this state are not jointly and severally liable for the debts of the corporation; but each stockholder has a several liability proportionate to the amount of his stock; and when he has paid his portion of any debt, or of all the debts of the corporation, he is freed from all liability, and has no cause of action against any other stockholder for money so paid.
    Appeal from a judgment of the Superior Court of San Bernardino County and from an order denying a new trial.
    The facts are stated in the opinion of the court.
    
      John W. Craig, for Appellants.
    
      Rolfe & Rolfe, for Respondent.
   Garoutte, J.

This action is against the defendant, Southern California Motor Road Company, a corporation, on a promissory note of the company, executed March 4,1890, and against the other defendants as stockholders, for their respective proportions of the indebtedness on said note, under section 322 of the Civil Code. A several judgment was given against the defendant Merrill, the appellant, for three hundred and thirty-six dollars and thirty-five cents, as his portion of said indebtedness, according to the amount of stock he held in the corporation.

Appellant claims that respondent cannot have the benefit of the statute of this state, imposing liability on stockholders for the corporation’s debts, because he is a stockholder himself. This contention is based upon the authority of Bailey v. Bancker, 3 Hill, 188, 38 Am. Dec. 625, and other cases to the same effect; hut the reason for the rule declared in those cases is entirely-wanting in this state, and it has no application here. In states where those decisions have been made the relation of stockholders inter sese is that of partners, and. it is thus apparent at a glance that no common-law action for money owing by the corporation would lie by a creditor stockholder against other stockholders.' In jurisdictions where the above doctrine has been declared, stockholders are severally and jointly liable for the debts of the corporation, but in this state there is no such liability. Each stockholder has a several liability and that liability is proportionate to the amount of his stock; and, when he has paid his portion of any debt, or of all the debts of the corporation, he is freed from all liability and has no cause of action against any stockholder for money so paid. In this state we see no reason why a creditor stockholder of a corporation may not sue other stockholders for their pro rata of the debt.

We see nothing in the other questions suggested by appellants’ brief demanding discussion.

The order and judgment are affirmed.

Van Fleet, J., and McFarland, J., concurred.