Brown v. Merrill

California Supreme Court

Brown v. Merrill

40 P. 557, 107 Cal. 446, 1895 Cal. LEXIS 773

CourtCalifornia Supreme Court

DecidedJune 7, 1895

DocketNo. 19578

StatusPublished

Cited by7 cases

This text of 40 P. 557 (Brown v. Merrill) is published on Counsel Stack Legal Research, covering California Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Brown v. Merrill, 40 P. 557, 107 Cal. 446, 1895 Cal. LEXIS 773 (Cal. 1895).

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Opinion

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. [447]*447Dec. 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.

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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. [447]*447Dec. 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.

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Bluebook (online)

40 P. 557, 107 Cal. 446, 1895 Cal. LEXIS 773, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brown-v-merrill-cal-1895.

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