Court Opinion

ID: 9539758
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:09:38.690322+00
Date Added: 2024-06-11T14:59:18.227601
License: Public Domain

SCHAUER, J., Concurring and Dissenting.
I concur in the judgment of reversal on the ground that (as stated in the majority opinion, ante, p. 581) “In this action to hold defendant personally liable upon the judgment against Seminole plaintiffs did not allege or present any evidence on the issue of Seminole’s negligence or on the amount of damages sustained by plaintiffs. They relied solely on the judgment against Seminole. Defendant correctly contends that Cavaney or his estate cannot be held liable for the debts of Seminole without an opportunity to relitigate these issues. [Citations.] Cavaney was not a party to the action against the corporation, and the judgment in that action is therefore not binding upon him. ...”
I dissent from any implication that mere professional activity by an attorney at law, as such, in the organization of a corporation, can constitute any basis for a finding that the corporation is the attorney’s alter ego or that he is otherwise personally liable for its debts, whether based on contract or tort. That in such circumstances an attorney does not incur any personal liability for debts of the corporation remains true whether or not the attorney’s professional services include the issuance to him of a qualifying share of stock, the attendance at and participation in an organization meeting or meetings, the holding and exercise for such preliminary purposes, in the course of his professional services, of an office or offices, whether secretary or treasurer or presiding officer or any combination of offices in the corporation.
The acts and services performed in organizing a corporation do not constitute the carrying on of business by a corporation. In this respect a corporation cannot properly be regarded as organized and ready to even begin carrying on business until at least qualifying shares of stock have been issued, a stockholders’ meeting held, by-laws adopted and directors and officers elected. Furthermore, a permit from the Commissioner of Corporations must have been secured and minimum requirements of that agency met before the corporation can secure assets for which its stock may issue (possibly to be impounded *583on conditions) and without which it cannot (at least normally) commence business. The scope of a lawyer’s services in corporate organization may often include advice and direction as to the legal architecture of financial structures but does not, as such, encompass responsibility for securing assets.
In the process of developing an idea of a person or persons into an embryonic corporation and finally to full legal entity status with a permit issued, directors and officers elected, and assets in hand ready to begin business, there may often be delays. In such event a qualifying share of stock may stand in the name of the organizing attorney for substantial periods of time. In none of the activities indicated is the corporation actually engaging in business. And the lawyer who handles the task of determining and directing and participating in the steps appropriate to transforming the idea into a competent legal entity ready to engage in business is not an alter ego of the corporation. By his professional acts he has not been engaging in business in the name of the corporation; he has been merely practicing law.
McComb, J., concurred.
Respondents’ petition for a rehearing was denied October 4, 1961.